Published on 19 May 2023 on Zacks via Yahoo Finance
Is MDC A More Profitable Homebuilding Pick Than Tri Pointe (TPH)?
After a long period of tepidness, the U.S. Housing market is rebounding. Limited existing inventory, stabilizing mortgage rates and improving industry trends are boosting buyers’ sentiments. Builders are also confident about future growth in the industry as inflation continuous to ease and rent growth are expected to slow down.Per the recent NAHB/Wells Fargo Housing Market Index, Builder confidence for newly built single-family homes in May rose five points to 50 from April. This is the first time that sentiment levels have reached to the midpoint of 50 since July 2022. Also, housing starts in April increased 2.2%, the highest rate thus far in 2023, reported by the U.S. Census Bureau.Although the industry is still dealing with high construction costs, persistent labor shortages and tightening credit conditions for construction loans, these metrics are gaining traction. This is backed by smallest monthly gain in the housing inflation since January 2022, thereby cooling off inflation below 5% for the first time in the past two years.In addition to these positives, Construction industry employment (residential and non-residential) exceeds its February 2020 levels. The latest housing data encourages the Zacks Building Products - Home Builders industry bellwethers like M.D.C. Holdings, Inc. MDC, Tri Pointe Homes, Inc. TPH, D.R. Horton, Inc. DHI and NVR Inc. NVR, each sporting a Zacks Rank #1 ( Strong Buy).Based on various parameters, let’s check whether MDC or Tri Pointe is a more profitable stock. It is to be noted that both companies are almost neck to neck in terms of market cap. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Determinants of the Stocks
MDC — with a market cap of more than $3.08 billion — engages in building and selling single-family detached homes for first-time and move-up buyers under the name “Richmond American Homes.”The company’s Build-to-Order process, also known as ‘dirt sales’, provides buyers with a wide range of choices in major aspects of their future home and personalized customer experience through in-house community teams. MDC’s Financial Services operations offer mortgage loans, insurance coverage and title agency services to its subsidiaries and customers in the United States.Tri Pointe — with a market cap of almost $2.96 billion — designs, constructs and sells innovative single-family detached and attached homes designed primarily for entry-level, move-up, luxury and active adult homebuyers. The company builds premium homes and communities in 10 states.The company has been benefiting from solid homebuilding industry fundamentals, land acquisition strategy and cost-control measures. Also, strong demographics and limited availability of homes are likely to support the company in the future. The company anticipates that potential homeowners will continue to seek homeownership despite rising home prices and increasing rental costs.