Intrinsic value of D.R. Horton - DHI

Previous Close

$43.99

  Intrinsic Value

$68.44

stock screener

  Rating & Target

str. buy

+56%

Previous close

$43.99

 
Intrinsic value

$68.44

 
Up/down potential

+56%

 
Rating

str. buy

We calculate the intrinsic value of DHI stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2017), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 16.5

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  15.90
  14.81
  13.83
  12.95
  12.15
  11.44
  10.79
  10.21
  9.69
  9.22
  8.80
  8.42
  8.08
  7.77
  7.49
  7.24
  7.02
  6.82
  6.64
  6.47
  6.33
  6.19
  6.07
  5.97
  5.87
  5.78
  5.70
  5.63
  5.57
  5.51
Revenue, $m
  16,331
  18,750
  21,343
  24,106
  27,035
  30,127
  33,379
  36,788
  40,354
  44,075
  47,954
  51,992
  56,192
  60,559
  65,097
  69,813
  74,713
  79,807
  85,103
  90,612
  96,343
  102,309
  108,523
  114,997
  121,747
  128,787
  136,133
  143,803
  151,813
  160,183
Variable operating expenses, $m
  14,281
  16,387
  18,645
  21,052
  23,603
  26,295
  29,127
  32,096
  35,201
  38,443
  41,763
  45,279
  48,937
  52,740
  56,692
  60,799
  65,067
  69,503
  74,115
  78,912
  83,903
  89,099
  94,511
  100,149
  106,027
  112,159
  118,556
  125,236
  132,212
  139,501
Fixed operating expenses, $m
  193
  197
  202
  206
  211
  215
  220
  225
  230
  235
  240
  245
  251
  256
  262
  268
  274
  280
  286
  292
  298
  305
  312
  319
  326
  333
  340
  348
  355
  363
Total operating expenses, $m
  14,474
  16,584
  18,847
  21,258
  23,814
  26,510
  29,347
  32,321
  35,431
  38,678
  42,003
  45,524
  49,188
  52,996
  56,954
  61,067
  65,341
  69,783
  74,401
  79,204
  84,201
  89,404
  94,823
  100,468
  106,353
  112,492
  118,896
  125,584
  132,567
  139,864
Operating income, $m
  1,857
  2,166
  2,496
  2,848
  3,222
  3,617
  4,032
  4,467
  4,922
  5,398
  5,952
  6,468
  7,005
  7,563
  8,143
  8,746
  9,373
  10,025
  10,702
  11,407
  12,141
  12,905
  13,700
  14,529
  15,394
  16,296
  17,237
  18,220
  19,246
  20,319
EBITDA, $m
  3,359
  3,881
  4,441
  5,037
  5,670
  6,338
  7,040
  7,777
  8,548
  9,352
  10,191
  11,064
  11,972
  12,916
  13,898
  14,918
  15,978
  17,080
  18,226
  19,417
  20,658
  21,949
  23,294
  24,695
  26,156
  27,680
  29,271
  30,932
  32,667
  34,479
Interest expense (income), $m
  0
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
  32
Earnings before tax, $m
  1,826
  2,134
  2,464
  2,817
  3,190
  3,585
  4,000
  4,435
  4,891
  5,366
  5,920
  6,436
  6,973
  7,531
  8,111
  8,715
  9,341
  9,993
  10,671
  11,376
  12,109
  12,873
  13,669
  14,498
  15,362
  16,264
  17,205
  18,188
  19,215
  20,287
Tax expense, $m
  493
  576
  665
  760
  861
  968
  1,080
  1,198
  1,320
  1,449
  1,598
  1,738
  1,883
  2,033
  2,190
  2,353
  2,522
  2,698
  2,881
  3,071
  3,269
  3,476
  3,691
  3,914
  4,148
  4,391
  4,645
  4,911
  5,188
  5,478
Net income, $m
  1,333
  1,558
  1,799
  2,056
  2,329
  2,617
  2,920
  3,238
  3,570
  3,917
  4,321
  4,698
  5,090
  5,498
  5,921
  6,362
  6,819
  7,295
  7,790
  8,304
  8,840
  9,397
  9,978
  10,583
  11,214
  11,873
  12,560
  13,277
  14,027
  14,810

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  -4,973
  -5,710
  -6,499
  -7,341
  -8,232
  -9,174
  -10,164
  -11,202
  -12,288
  -13,421
  -14,602
  -15,832
  -17,111
  -18,441
  -19,822
  -21,258
  -22,751
  -24,302
  -25,915
  -27,592
  -29,337
  -31,154
  -33,046
  -35,017
  -37,073
  -39,216
  -41,454
  -43,789
  -46,228
  -48,777
Adjusted assets (=assets-cash), $m
  -4,973
  -5,710
  -6,499
  -7,341
  -8,232
  -9,174
  -10,164
  -11,202
  -12,288
  -13,421
  -14,602
  -15,832
  -17,111
  -18,441
  -19,822
  -21,258
  -22,751
  -24,302
  -25,915
  -27,592
  -29,337
  -31,154
  -33,046
  -35,017
  -37,073
  -39,216
  -41,454
  -43,789
  -46,228
  -48,777
Revenue / Adjusted assets
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
  -3.284
Average production assets, $m
  14,437
  16,575
  18,867
  21,310
  23,899
  26,633
  29,507
  32,521
  35,673
  38,963
  42,392
  45,961
  49,674
  53,534
  57,546
  61,714
  66,047
  70,550
  75,231
  80,101
  85,167
  90,441
  95,934
  101,658
  107,624
  113,848
  120,342
  127,122
  134,203
  141,602
Working capital, $m
  -5,046
  -5,794
  -6,595
  -7,449
  -8,354
  -9,309
  -10,314
  -11,368
  -12,469
  -13,619
  -14,818
  -16,066
  -17,363
  -18,713
  -20,115
  -21,572
  -23,086
  -24,660
  -26,297
  -27,999
  -29,770
  -31,614
  -33,534
  -35,534
  -37,620
  -39,795
  -42,065
  -44,435
  -46,910
  -49,497
Total debt, $m
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
  587
Total liabilities, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total equity, $m
  -4,973
  -5,710
  -6,499
  -7,341
  -8,232
  -9,174
  -10,164
  -11,202
  -12,288
  -13,421
  -14,602
  -15,832
  -17,111
  -18,441
  -19,822
  -21,258
  -22,751
  -24,302
  -25,915
  -27,592
  -29,337
  -31,154
  -33,046
  -35,017
  -37,073
  -39,216
  -41,454
  -43,789
  -46,228
  -48,777
Total liabilities and equity, $m
  -4,973
  -5,710
  -6,499
  -7,341
  -8,232
  -9,174
  -10,164
  -11,202
  -12,288
  -13,421
  -14,602
  -15,832
  -17,111
  -18,441
  -19,822
  -21,258
  -22,751
  -24,302
  -25,915
  -27,592
  -29,337
  -31,154
  -33,046
  -35,017
  -37,073
  -39,216
  -41,454
  -43,789
  -46,228
  -48,777
Debt-to-equity ratio
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
  0.000
Adjusted equity ratio
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000
  1.000

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  1,333
  1,558
  1,799
  2,056
  2,329
  2,617
  2,920
  3,238
  3,570
  3,917
  4,321
  4,698
  5,090
  5,498
  5,921
  6,362
  6,819
  7,295
  7,790
  8,304
  8,840
  9,397
  9,978
  10,583
  11,214
  11,873
  12,560
  13,277
  14,027
  14,810
Depreciation, amort., depletion, $m
  1,502
  1,716
  1,945
  2,189
  2,448
  2,721
  3,009
  3,310
  3,625
  3,954
  4,239
  4,596
  4,967
  5,353
  5,755
  6,171
  6,605
  7,055
  7,523
  8,010
  8,517
  9,044
  9,593
  10,166
  10,762
  11,385
  12,034
  12,712
  13,420
  14,160
Funds from operations, $m
  2,835
  3,273
  3,744
  4,245
  4,777
  5,338
  5,929
  6,548
  7,195
  7,872
  8,561
  9,294
  10,058
  10,851
  11,676
  12,533
  13,424
  14,350
  15,313
  16,314
  17,356
  18,441
  19,571
  20,749
  21,977
  23,257
  24,594
  25,989
  27,447
  28,970
Change in working capital, $m
  -692
  -747
  -801
  -854
  -905
  -955
  -1,005
  -1,053
  -1,102
  -1,150
  -1,199
  -1,248
  -1,298
  -1,349
  -1,402
  -1,457
  -1,514
  -1,574
  -1,636
  -1,702
  -1,771
  -1,844
  -1,920
  -2,001
  -2,086
  -2,175
  -2,270
  -2,370
  -2,475
  -2,586
Cash from operations, $m
  3,527
  4,021
  4,545
  5,099
  5,682
  6,294
  6,933
  7,601
  8,297
  9,022
  9,759
  10,542
  11,355
  12,200
  13,078
  13,990
  14,938
  15,924
  16,949
  18,016
  19,127
  20,285
  21,491
  22,750
  24,062
  25,433
  26,864
  28,359
  29,922
  31,556
Maintenance CAPEX, $m
  -1,245
  -1,444
  -1,658
  -1,887
  -2,131
  -2,390
  -2,663
  -2,951
  -3,252
  -3,567
  -3,896
  -4,239
  -4,596
  -4,967
  -5,353
  -5,755
  -6,171
  -6,605
  -7,055
  -7,523
  -8,010
  -8,517
  -9,044
  -9,593
  -10,166
  -10,762
  -11,385
  -12,034
  -12,712
  -13,420
New CAPEX, $m
  -1,986
  -2,138
  -2,292
  -2,443
  -2,589
  -2,733
  -2,874
  -3,014
  -3,152
  -3,290
  -3,429
  -3,570
  -3,713
  -3,860
  -4,012
  -4,169
  -4,332
  -4,503
  -4,682
  -4,869
  -5,067
  -5,274
  -5,493
  -5,723
  -5,967
  -6,223
  -6,494
  -6,780
  -7,081
  -7,399
Cash from investing activities, $m
  -3,231
  -3,582
  -3,950
  -4,330
  -4,720
  -5,123
  -5,537
  -5,965
  -6,404
  -6,857
  -7,325
  -7,809
  -8,309
  -8,827
  -9,365
  -9,924
  -10,503
  -11,108
  -11,737
  -12,392
  -13,077
  -13,791
  -14,537
  -15,316
  -16,133
  -16,985
  -17,879
  -18,814
  -19,793
  -20,819
Free cash flow, $m
  295
  439
  595
  770
  962
  1,170
  1,396
  1,637
  1,893
  2,164
  2,434
  2,733
  3,046
  3,373
  3,713
  4,067
  4,435
  4,816
  5,213
  5,624
  6,051
  6,494
  6,954
  7,433
  7,930
  8,447
  8,985
  9,545
  10,129
  10,737
Issuance/(repayment) of debt, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Issuance/(repurchase) of shares, $m
  -682
  -737
  -790
  -841
  -892
  -941
  -990
  -1,038
  -1,086
  -1,133
  -1,181
  -1,230
  -1,279
  -1,330
  -1,382
  -1,436
  -1,492
  -1,551
  -1,613
  -1,677
  -1,745
  -1,817
  -1,892
  -1,972
  -2,055
  -2,144
  -2,237
  -2,335
  -2,439
  -2,549
Cash from financing (excl. dividends), $m  
  -682
  -737
  -790
  -841
  -892
  -941
  -990
  -1,038
  -1,086
  -1,133
  -1,181
  -1,230
  -1,279
  -1,330
  -1,382
  -1,436
  -1,492
  -1,551
  -1,613
  -1,677
  -1,745
  -1,817
  -1,892
  -1,972
  -2,055
  -2,144
  -2,237
  -2,335
  -2,439
  -2,549
Total cash flow (excl. dividends), $m
  -386
  -298
  -194
  -72
  70
  229
  406
  599
  807
  1,031
  1,253
  1,504
  1,767
  2,043
  2,331
  2,631
  2,942
  3,265
  3,600
  3,947
  4,306
  4,677
  5,062
  5,461
  5,875
  6,303
  6,748
  7,210
  7,690
  8,188
Retained Cash Flow (-), $m
  682
  737
  790
  841
  892
  941
  990
  1,038
  1,086
  1,133
  1,181
  1,230
  1,279
  1,330
  1,382
  1,436
  1,492
  1,551
  1,613
  1,677
  1,745
  1,817
  1,892
  1,972
  2,055
  2,144
  2,237
  2,335
  2,439
  2,549
Prev. year cash balance distribution, $m
  4,291
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  42
  0
  0
  0
  72
  81
  90
  100
  110
  121
  132
  144
  156
  169
  182
  195
  209
  224
  239
  255
  272
  289
  307
  326
  345
  365
  386
  408
  431
  455
Cash available for distribution, $m
  4,587
  737
  790
  841
  962
  1,170
  1,396
  1,637
  1,893
  2,164
  2,434
  2,733
  3,046
  3,373
  3,713
  4,067
  4,435
  4,816
  5,213
  5,624
  6,051
  6,494
  6,954
  7,433
  7,930
  8,447
  8,985
  9,545
  10,129
  10,737
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  4,397
  674
  687
  693
  745
  849
  943
  1,023
  1,088
  1,135
  1,156
  1,166
  1,158
  1,132
  1,090
  1,033
  965
  887
  803
  715
  626
  539
  456
  379
  308
  246
  193
  148
  111
  81
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

D.R. Horton, Inc. is a homebuilding company. The Company constructed and sold homes in 27 states and 79 markets, as of September 30, 2015. The Company's segments include its 39 homebuilding divisions, its financial services operations and its other business activities. In the homebuilding segment, the Company builds and sells single-family detached homes and attached homes, such as town homes, duplexes, triplexes and condominiums. The Company's 39 homebuilding divisions are aggregated into six segments: East Region, South Central Region, Midwest Region, West Region, Southwest Region and Southeast Region. In the financial services segment, the Company sells mortgages and collects fees for title insurance agency and closing services. The Company has subsidiaries that conduct insurance-related operations; construct and own income-producing rental properties; own non-residential real estate, including ranch land and improvements, and own and operate oil and gas-related assets.

FINANCIAL RATIOS  of  D.R. Horton (DHI)

Valuation Ratios
P/E Ratio 15.9
Price to Sales 1.2
Price to Book 2.1
Price to Tangible Book
Price to Cash Flow 37.9
Price to Free Cash Flow 59.3
Growth Rates
Sales Growth Rate 15.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 82.6%
Cap. Spend. - 3 Yr. Gr. Rate 9.4%
Financial Strength
Quick Ratio 2
Current Ratio NaN
LT Debt to Equity 31.7%
Total Debt to Equity 37.1%
Interest Coverage 0
Management Effectiveness
Return On Assets 8.7%
Ret/ On Assets - 3 Yr. Avg. 7.9%
Return On Total Capital 10%
Ret/ On T. Cap. - 3 Yr. Avg. 9%
Return On Equity 14.3%
Return On Equity - 3 Yr. Avg. 14%
Asset Turnover 1.2
Profitability Ratios
Gross Margin 21.8%
Gross Margin - 3 Yr. Avg. 21.7%
EBITDA Margin 11.8%
EBITDA Margin - 3 Yr. Avg. 11.4%
Operating Margin 11.4%
Oper. Margin - 3 Yr. Avg. 11%
Pre-Tax Margin 11.4%
Pre-Tax Margin - 3 Yr. Avg. 11%
Net Profit Margin 7.4%
Net Profit Margin - 3 Yr. Avg. 7.2%
Effective Tax Rate 35.2%
Eff/ Tax Rate - 3 Yr. Avg. 34.3%
Payout Ratio 14.5%

DHI stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the DHI stock intrinsic value calculation we used $14091 million for the last fiscal year's total revenue generated by D.R. Horton. The default revenue input number comes from 2017 income statement of D.R. Horton. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our DHI stock valuation model: a) initial revenue growth rate of 15.9% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for DHI is calculated based on our internal credit rating of D.R. Horton, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of D.R. Horton.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of DHI stock the variable cost ratio is equal to 87.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $189 million in the base year in the intrinsic value calculation for DHI stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for D.R. Horton.

Corporate tax rate of 27% is the nominal tax rate for D.R. Horton. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the DHI stock is equal to 0.3%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for DHI are equal to 88.4%.

Life of production assets of 10 years is the average useful life of capital assets used in D.R. Horton operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for DHI is equal to -30.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $0 million for D.R. Horton - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 374 million for D.R. Horton is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of D.R. Horton at the current share price and the inputted number of shares is $16.5 billion.

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