Homebuilders have had a terrific run this year, outperforming the broad market by a good margin. The strong performance can be attributed to a recovery in the housing market. Let's take a look at some of the top performers in the sector.
KB Home (KBH): Shares of the Los Angeles, California-based homebuilding company are currently trading around $12.65, up nearly 3.5% from Tuesday's closing price. YTD, KBH has gained more than 88%.
KBH has a 52-week high of $13.12, which indicates that the stock has some upside potential from its current level. Technical indicators for KBH are currently giving bullish signals. The stock is trading above its 50-day and 200-day moving averages. The MACD chart is also pointing to further gains.
KBH has been gaining momentum after breaking through $11 resistance level last month.
KBH currently has a dividend yield of only 0.79%. It has a Price/Sales ratio of 0.67, which is in-line with the industry average. The company registered an 11.40% year-over-year growth in revenue in its most recently reported quarter.
KBH's homebuilding operating loss narrowed significantly in the most recently reported quarter. As of May 31, 2012, KBH had a backlog of 2,962 homes.
D.R. Horton Inc. (DHI): DHI shares have gained more than 62% YTD. The stock is currently trading around $20.50, up nearly 0.9% from its closing price on Tuesday. DHI hit a 52-week high of $20.70 earlier today.
DHI's technical indicators suggest that the stock still has some upside potential. The stock is trading well above its 50-day and 200-day moving averages.
Although DHI has hit a 52-week high today, the stock is still attractively valued at current levels. DHI has a P/E ratio of 7.68, compared to 11.03 for the industry. The stock has a dividend yield of 0.73%.
Fort Worth, Texas-based DHI had a backlog of homes under contract at the end of June of 7,311 homes, representing an increase of 31%. DHI's net sales orders in its most recently reported quarter rose 25% to 6,079 homes.
Lennar Corporation (LEN): LEN shares also hit a 52-week high in trading today. LEN shares are currently trading at $34.15, up more than 3% from Tuesday's closing price, after hitting a 52-week high of $34.34 earlier today. YTD, LEN has gained nearly 74%.
The technical indicators for LEN suggest that the stock still has upside potential. The MACD chart confirms the bullish trend. LEN is also trading above its 50-day and 200-day moving averages.
At 14.38, LEN's P/E ratio is higher than the average for the industry. LEN's dividend yield is 0.47%, lower than DHI and KBH.
Investors are prepared to pay a premium for LEN because of the company's strong operating and financial performance. At the end of May 31, 2012, LEN had a backlog of 3,970 homes, up 61% over the same period last year. LEN's operating margin improved 100% to 9.2% in its most recently reported quarter. This is the highest operating margin percentage for the company since the second quarter of 2006.
PulteGroup Inc. (PHM): PHM is the best performing homebuilder stock in trading, up 6% currently from Tuesday's closing price. PHM also hit a 52-week high in trading today. YTD, PHM has gained more than 146%.
PHM is currently trading well above its 50-day and 200-day moving averages, a bullish signal. PHM has been on an upward trajectory after bottoming out in late June. PHM's technical indicators point to further gains.
Based in Bloomfield Hills, Michigan, PHM is on track to achieve full-year profitability, which explains the stock's strong performance. In its most recently reported quarter, PHM saw a 32% increase in net new orders. As of June 30, 2012, PHM had a backlog of 7,560 homes.
Toll Brothers Inc. (TOL): TOL shares hit a 52-week high of $34.66 in trading today, and are currently trading more than 3% higher from Tuesday's closing price. YTD, TOL has gained nearly 70%.
TOL's MACD is above the signal line, which confirms the bullish trend. TOL is also trading above its 50-day and 200-day moving averages, which further confirms the bullish trend.
TOL has a P/E ratio of 64.16, which is significantly higher than the industry average. TOL commands high valuation because of its strong financial performance. In the most recently reported quarter, TOL's revenue rose an impressive 40.60%.
At the end of July 31, 2012, TOL had a backlog of 2,559 homes, up 44% over the same period in the previous year. CEO Douglas C. Yearley said during the release of the company's most recent quarterly results that TOL is enjoying the most sustained demand it has experienced in more than five years.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.