Chatter about homebuilders has picked up since Berkshire bought LEN, so I went through five of the big US builders to see if any of them are value stocks.
They all peaked within ten weeks of each other in late 2024 and every one is down since, while the Russell 3000 is up 36% over the same period. They're obviously cheaper on price, so I checked what actually happened to the multiple on each one.
|Ticker|Price|EPS|P/E then|P/E now|Change|Own 10yr median|vs median|
|:-|:-|:-|:-|:-|:-|:-|:-|
|LEN|\-58%|\-65%|12.8|15.5|\+21%|10.3|\+50%|
|PHM|\-20%|\-28%|11.1|12.2|\+10%|8.6|\+42%|
|DHI|\-29%|\-30%|13.3|13.5|\+2%|12.0|\+12%|
|TOL|\-19%|\-17%|11.2|10.9|\-3%|9.8|\+11%|
|NVR|\-37%|\-21%|20.4|16.3|\-20%|16.5|\-1%|
Price and EPS run from each company's own 2024 peak to today. EPS is ttm of filed diluted earnings, taken at the peak date and now, so the first two columns multiply out into the P/E change.
So 4 of the 5 aren't really any cheaper than they were at the top, even after the drop. Lennar's price is down 58% but its earnings are down 65%, so it now trades 21% above the multiple it had at the peak. Compare its current PE (15.5) with its 10 year median (10.3) and it's 50% above its own norm. It hasn't gotten cheaper, it's gotten more expensive.
PHM and DHI are similar. EPS fell more than the price, so they're more expensive than at the peak and above their 10 year medians. Toll's PE has stayed around 11, but that's still 11% above its 10 year median.
NVR is the only one that's had a real derating. Price down 37% vs earnings down 21%. It started at 20.4x though, the richest of the five at the top, so a 20% cut has just taken it back to normal (basically right on its 10 year median). Still the only one here I'd spend more time on.
So based on the price drop they look cheap, but once you look at earnings they're not cheap, and mostly not cheaper than they were. This is only two variables though, price and earnings, so there's more work to do before drawing real conclusions.
Not investment advice. DYOR.