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Beazer Homes Delivers Solid Progress

May 01, 2021 1:11 PM ETBeazer Homes USA, Inc. (BZH)11 Comments


  • We take a look at Beazer Homes for the first time here in 2021 after the company delivered a solid second quarter report.
  • Backlogs are growing rapidly and the company should deliver solid earnings growth in FY2021.
  • A full analysis is presented in the paragraphs below.
  • I do much more than just articles at The Insiders Forum: Members get access to model portfolios, regular updates, a chat room, and more. Learn More »

Interior view of a house under construction
Photo by photovs/iStock via Getty Images

"Home is the place where, when you have to go there, they have to take you in."― Robert Frost

We take our first in-depth look at Beazer Homes (NYSE:BZH) so far in 2021. The company

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This article was written by

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We are a team of analysts led by Bret Jensen, Chief Investment Strategist at Simplified Asset Management.

We run the investing group The Insiders Forum where we specialize in small and mid-cap stocks that insiders are buying. The Insiders Forum portfolio managed by Bret Jensen consists of 12-25 top stocks in different sectors of the market that are attractively valued and have had some significant and recent insider purchases. Our goal is to outperform the Russell 2000 (the benchmark) over time.

Analyst’s Disclosure: I am/we are long BZH. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (11)

The Insiders Forum profile picture
Beazer Homes USA (NYSE:BZH) stock perked up 2.7% in Wednesday premarket trading after Wedbush upgraded shares of the homebuilder to Outperform from Neutral as a rebound in new housing demand is expected to drive up the company's price-to-tangible book value multiple.

"We believe the rebound in new housing demand thus far in 2023 has been driven by a lack of existing home competition in most markets and by tools like mortgage rate and closing cost incentives that help buyers solve for the payment they need," analyst Jay McCanless wrote in a note.

In turn, the sell-side analyst anticipates BZH's 2024 price-to-TBV multiple to approach 0.9 times compared with the current 0.7x multiple. He also increased his 2024 EPS estimate to $4.67, vs. $4.04, from $4.24, and his full-year revenue estimate to $2.3B, vs. $2.07B consensus, from $2.2B.

Beazer's (BZH) balance sheet is expected to improve, the note said, which could provide the firm flexibility to repay its $211M term debt facility due in March 2025, or "potentially refinance the debt" if interest rates fall.
Reporting tomorrow after close looking for $.90! super cheap
OverTheHorizon profile picture
Premier homebuilder hiding in plain sight.

BZH remains undervalued relative to the sector. Scale and high leverage have historically been the factors driving the valuation discount. With deleveraging likely to continue on strong cash flow growth and debt paydown, stock should continue to re-rate. A 1.5x book multiple at the low end of the sector suggests $31-32 fair value.
Mismanaged, drowning in debt, and left for dead after the GFC, BZH has, not like a Phoenix but, slowly risen from the ashes. Believe it or not, shares I bought in 2010 are almost back to par. I even bought some more a few months ago which are up 35%. Mgmt got a lot smarter and more careful, though that wouldn't have saved them, were it not for the building boom and mortgage rate paradise of the last decade.

Glad I didn't sell despite all the doomsday sayers. I will admit, BZH was a close call many times over the past decade, but I could afford the gamble. So I did.
what would be considered as the best of the breeds within the builders' space? Thanks
Thank! Nice article. A large portion of corporate labor is know being offered permanent remote positions, so the trend from urban to suburban and larger living spaces should continue.
OverTheHorizon profile picture
I believe we are in a 5-7 cyclical bull market in housing due to Millennial demographics, historically low interest rates +/ 3%, rising employment and the authors very astute assessment of the urban to suburban trends:

"We had an extraordinary quarter, highlighted by an unprecedented increase in our sales pace, and significant growth in our gross margin, EBITDA and net income.

Perhaps the best news is that our team is poised to translate continuing strength and market conditions into even better results in the quarters ahead."

BZH earnings transcript
@OverTheHorizon Maybe. I think that's offset by the 3x cost increase in lumber & labor, as well as other building supplied.

I can't believe that the millennial market is going to absorb $65 plywood & $170 Romex for long.
OverTheHorizon profile picture
@arete_builders increased costs will be passed thru
@OverTheHorizon Yeah, thats how business works. Ferrarri passes their increased costs through, which is why I can't afford one.

Likewise, if the cost of housing triples because of climate change, tariffs, and the idiots running the power grid in Texas, theres only so much cost that the market can bear...

I'm a home builder, and I'm pretty aware of what happens when prices triple in 6 months. People walk away from projects.
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