D.R. Horton Inc.

Technical Analysis

DHI has shown impressive momentum, delivering strong double-digit returns over the past three months and significantly outperforming the market. While the stock is trading near the upper end of its 52-week range, it still has room before reaching its peak. However, its high Beta indicates notable volatility, suggesting investors should brace for larger price swings.

Fundamentals

D.H. Horton maintains solid profitability with healthy gross and net margins, despite normal seasonal revenue fluctuations. The company exhibits exceptional financial health with low debt, strong liquidity, and ample interest coverage. However, operational efficiency is mixed, with modest returns on equity and a lengthy cash conversion cycle typical for homebuilders.

Valuation & Risk

On a P/E basis, DHI appears reasonably valued, but its extremely high EV/EBITDA and negative PEG ratio raise concerns about cash flow and growth expectations. Risks include heightened volatility, susceptibility to housing market cycles, and sensitivity to interest rate changes, requiring careful monitoring of economic conditions.

Investment Recommendation

Buy. DHI remains a compelling choice for investors seeking exposure to a well-managed leader in the homebuilding sector, supported by strong fundamentals and positive momentum. Its moderate P/E and robust balance sheet provide a reasonable margin of safety. However, given cyclical risks and lofty cash flow multiples, it is best suited for those comfortable with sector volatility and holding through potential downturns.

*Note: This is not investment advice, for reference only.*

RockFlow Model Forecast: Three Scenarios for 2026

Based on the provided analysis, here is a 12-month outlook for D.R. Horton (DHI):

The primary catalysts supporting the stock are its strong operational momentum, solid profitability, and a robust balance sheet with low debt, positioning it as a leader to capitalize on housing demand. Key risks center on the stock's high volatility and the sector's sensitivity to economic shifts in interest rates and broader economic cycles, which could pressure earnings if the housing market cools. While a specific target price is unavailable, the "Buy" recommendation suggests confidence in the company's quality, though upside potential is tempered by cyclical risks and lofty cash flow valuations; investors should expect a relatively wide trading range influenced by market sentiment towards housing.

Wall Street Consensus

Most Wall Street analysts are optimistic about D.R. Horton Inc.'s 12-month outlook, with consensus target around $163.78, indicating expected upside potential.

Overall, DHI has investment potential but also faces challenges. Here are key factors to weigh before investing.

DHI has demonstrated exceptional strength with significant double-digit returns over the past three months.

The stock has delivered strong short-term performance, gaining 7.03% over one month and 14.31% over three months, substantially outperforming the market by 13.94% during the latter period. This robust performance, combined with a beta of 1.45, indicates higher volatility but superior returns relative to the broader market.

Currently trading at $166.92, DHI sits approximately 77% above its 52-week low but remains about 10% below its 52-week high of $184.545. While not at extreme overbought levels, the stock's position in the upper portion of its annual range, coupled with its recent strong momentum, suggests it may be approaching overbought territory despite having room before reaching its peak.

Revenue & Profitability DHI's Q1 2026 revenue of $6.89 billion represents a sequential decline from the previous quarter's $9.68 billion, reflecting normal seasonality in the homebuilding industry. Profitability metrics remain healthy with a gross profit margin of 23.2% and net profit margin of 8.6%, though slightly compressed compared to Q4 2025 levels. The company maintains solid operating income margins above 10%, indicating sustained operational profitability.

Financial Health The company demonstrates exceptional financial strength with a low debt ratio of 16.0% and a strong current ratio of 6.6, indicating ample liquidity. Debt levels are conservative with a debt-to-equity ratio of 23.1%, while interest coverage of 23.3x provides significant earnings cushion for debt servicing. Operating cash flow coverage remains adequate, supporting the company's stable financial position.

Operational Efficiency DHI's operational efficiency shows mixed results, with a modest return on equity of 2.5% and asset turnover of 0.20 in the latest quarter. The company maintains high inventory levels typical for homebuilders, evidenced by 435 days of inventory outstanding. Fixed asset turnover of 11.8 suggests effective utilization of property and equipment, though working capital management could see improvement given the extended cash conversion cycle of 418 days.

Valuation Level: DHI's current TTM PE ratio of 14.29 appears reasonable based on historical market standards, though its forward PE of 17.70 suggests expectations for slightly higher earnings. The significantly negative PEG ratio of -0.53, typically indicating either negative growth expectations or anomalous earnings data, warrants caution despite what seems like an attractive earnings multiple. Notably, the elevated EV/EBITDA of 59.61 points to high enterprise value relative to operating earnings, potentially signaling overvaluation on a cash flow basis.

Peer Comparison: A conclusive peer comparison cannot be performed as industry average data is unavailable. However, the PE ratio around 14-18 would generally be considered moderate for cyclical industries like homebuilding, though the extreme EV/EBITDA multiple stands out as unusually high without sector context. The absence of benchmark data limits the ability to determine whether DHI's valuation metrics are aligned with or divergent from industry norms.

D.H. Horton (DHI) exhibits elevated volatility risk, as evidenced by its Beta of 1.45, indicating the stock is 45% more volatile than the broader market. This high sensitivity to market swings is further confirmed by a significant one-year maximum drawdown of -25.39%, highlighting substantial downside potential during market downturns.

The risk profile for DHI is primarily driven by market and sector-specific factors, given the complete absence of short interest. Its substantial market capitalization ensures good liquidity, but investors should be mindful of risks inherent to the cyclical homebuilding industry, such as interest rate sensitivity and economic downturns impacting housing demand.