Reviewing D. R. Horton (NYSE:DHI) & Taylor Morrison Home (TMHC)

D. R. Horton (NYSE: DHI) and Taylor Morrison Home (NYSE:TMHC) are both mid-cap construction companies, but which is the superior investment? We will compare the two companies based on the strength of their valuation, earnings, institutional ownership, analyst recommendations, profitability, dividends and risk.

Profitability

This table compares D. R. Horton and Taylor Morrison Home’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
D. R. Horton 7.37% 14.13% 8.69%
Taylor Morrison Home 2.41% 4.18% 2.21%

Insider and Institutional Ownership

84.6% of D. R. Horton shares are owned by institutional investors. Comparatively, 59.2% of Taylor Morrison Home shares are owned by institutional investors. 7.2% of D. R. Horton shares are owned by company insiders. Comparatively, 2.4% of Taylor Morrison Home shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Analyst Ratings

This is a summary of current recommendations and price targets for D. R. Horton and Taylor Morrison Home, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
D. R. Horton 0 6 10 0 2.63
Taylor Morrison Home 0 4 1 0 2.20

D. R. Horton currently has a consensus target price of $44.07, suggesting a potential downside of 12.62%. Taylor Morrison Home has a consensus target price of $23.25, suggesting a potential downside of 2.80%. Given Taylor Morrison Home’s higher possible upside, analysts clearly believe Taylor Morrison Home is more favorable than D. R. Horton.

Valuation and Earnings

This table compares D. R. Horton and Taylor Morrison Home’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
D. R. Horton $14.09 billion 1.34 $1.04 billion $2.73 18.47
Taylor Morrison Home $3.55 billion 0.81 $52.61 million $1.84 13.00

D. R. Horton has higher revenue and earnings than Taylor Morrison Home. Taylor Morrison Home is trading at a lower price-to-earnings ratio than D. R. Horton, indicating that it is currently the more affordable of the two stocks.

Dividends

D. R. Horton pays an annual dividend of $0.50 per share and has a dividend yield of 1.0%. Taylor Morrison Home does not pay a dividend. D. R. Horton pays out 18.3% of its earnings in the form of a dividend. D. R. Horton has increased its dividend for 5 consecutive years.

Risk & Volatility

D. R. Horton has a beta of 1.31, indicating that its share price is 31% more volatile than the S&P 500. Comparatively, Taylor Morrison Home has a beta of 1.47, indicating that its share price is 47% more volatile than the S&P 500.

Summary

D. R. Horton beats Taylor Morrison Home on 14 of the 17 factors compared between the two stocks.

D. R. Horton Company Profile

D.R. Horton, Inc. is a homebuilding company. The Company constructed and sold homes in 27 states and 79 markets, as of September 30, 2015. The Company’s segments include its 39 homebuilding divisions, its financial services operations and its other business activities. In the homebuilding segment, the Company builds and sells single-family detached homes and attached homes, such as town homes, duplexes, triplexes and condominiums. The Company’s 39 homebuilding divisions are aggregated into six segments: East Region, South Central Region, Midwest Region, West Region, Southwest Region and Southeast Region. In the financial services segment, the Company sells mortgages and collects fees for title insurance agency and closing services. The Company has subsidiaries that conduct insurance-related operations; construct and own income-producing rental properties; own non-residential real estate, including ranch land and improvements, and own and operate oil and gas-related assets.

Taylor Morrison Home Company Profile

Taylor Morrison Home Corporation is a homebuilder, which designs, builds and sells single-family detached and attached homes. The Company is also a land developer, with a portfolio of lifestyle and master-planned communities. Its segments include East, which includes Atlanta, Charlotte, North Florida, Raleigh, Southwest Florida and Tampa; Central, which includes Austin, Dallas, and Houston (each of the Dallas and Houston markets include both a Taylor Morrison division and a Darling Homes division); West, which includes Bay Area, Chicago, Denver, Phoenix, Sacramento and Southern California, and Mortgage Operations, which includes Taylor Morrison Home Funding, LLC (TMHF) and Inspired Title Services, LLC (Inspired Title). It operates under the Taylor Morrison and Darling Homes brand names. The Company also provides financial services to customers through its mortgage subsidiary, TMHF, and title insurance and closing settlement services through its title company, Inspired Title.

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