Intrinsic value of D.R. Horton - DHI

Previous Close

$42.67

  Intrinsic Value

$111.05

stock screener

  Rating & Target

str. buy

+160%

  Value-price divergence*

-20%

Previous close

$42.67

 
Intrinsic value

$111.05

 
Up/down potential

+160%

 
Rating

str. buy

 
Value-price divergence*

-20%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

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 2016), $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 16.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   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

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  12.32
  16.80
  15.62
  14.56
  13.60
  12.74
  11.97
  11.27
  10.64
  10.08
  9.57
  9.11
  8.70
  8.33
  8.00
  7.70
  7.43
  7.19
  6.97
  6.77
  6.59
  6.43
  6.29
  6.16
  6.05
  5.94
  5.85
  5.76
  5.69
  5.62
  5.56
Revenue, $m
  12,157
  14,199
  16,417
  18,807
  21,366
  24,088
  26,971
  30,011
  33,205
  36,552
  40,050
  43,701
  47,504
  51,462
  55,579
  59,858
  64,306
  68,927
  73,730
  78,722
  83,913
  89,312
  94,931
  100,781
  106,874
  113,224
  119,844
  126,750
  133,957
  141,482
  149,342
Variable operating expenses, $m
 
  11,742
  13,574
  15,549
  17,663
  19,913
  22,295
  24,807
  27,447
  30,212
  33,103
  36,112
  39,255
  42,526
  45,927
  49,463
  53,138
  56,957
  60,926
  65,051
  69,341
  73,803
  78,446
  83,279
  88,314
  93,561
  99,032
  104,739
  110,694
  116,913
  123,408
Fixed operating expenses, $m
 
  783
  803
  823
  843
  864
  886
  908
  931
  954
  978
  1,002
  1,027
  1,053
  1,080
  1,106
  1,134
  1,163
  1,192
  1,221
  1,252
  1,283
  1,315
  1,348
  1,382
  1,416
  1,452
  1,488
  1,525
  1,563
  1,603
Total operating expenses, $m
  10,804
  12,525
  14,377
  16,372
  18,506
  20,777
  23,181
  25,715
  28,378
  31,166
  34,081
  37,114
  40,282
  43,579
  47,007
  50,569
  54,272
  58,120
  62,118
  66,272
  70,593
  75,086
  79,761
  84,627
  89,696
  94,977
  100,484
  106,227
  112,219
  118,476
  125,011
Operating income, $m
  1,354
  1,675
  2,040
  2,435
  2,859
  3,311
  3,790
  4,295
  4,827
  5,385
  5,969
  6,587
  7,222
  7,884
  8,572
  9,288
  10,033
  10,807
  11,612
  12,449
  13,320
  14,227
  15,170
  16,153
  17,178
  18,246
  19,360
  20,523
  21,737
  23,006
  24,332
EBITDA, $m
  1,415
  1,722
  2,094
  2,496
  2,927
  3,386
  3,873
  4,387
  4,928
  5,496
  6,089
  6,709
  7,355
  8,028
  8,728
  9,456
  10,213
  11,000
  11,819
  12,670
  13,555
  14,477
  15,436
  16,435
  17,477
  18,563
  19,696
  20,878
  22,112
  23,402
  24,750
Interest expense (income), $m
  0
  114
  143
  173
  206
  241
  279
  318
  360
  404
  450
  498
  548
  600
  654
  711
  770
  831
  894
  960
  1,029
  1,100
  1,174
  1,251
  1,332
  1,415
  1,503
  1,594
  1,688
  1,787
  1,891
Earnings before tax, $m
  1,354
  1,560
  1,898
  2,262
  2,653
  3,070
  3,511
  3,977
  4,468
  4,982
  5,519
  6,089
  6,674
  7,284
  7,918
  8,577
  9,263
  9,976
  10,718
  11,489
  12,291
  13,126
  13,996
  14,902
  15,846
  16,830
  17,857
  18,929
  20,049
  21,219
  22,441
Tax expense, $m
  468
  421
  512
  611
  716
  829
  948
  1,074
  1,206
  1,345
  1,490
  1,644
  1,802
  1,967
  2,138
  2,316
  2,501
  2,694
  2,894
  3,102
  3,319
  3,544
  3,779
  4,023
  4,278
  4,544
  4,821
  5,111
  5,413
  5,729
  6,059
Net income, $m
  886
  1,139
  1,385
  1,651
  1,937
  2,241
  2,563
  2,903
  3,261
  3,637
  4,029
  4,445
  4,872
  5,317
  5,780
  6,261
  6,762
  7,283
  7,824
  8,387
  8,973
  9,582
  10,217
  10,878
  11,567
  12,286
  13,036
  13,818
  14,636
  15,490
  16,382

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,303
  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
  11,559
  11,983
  13,854
  15,871
  18,030
  20,327
  22,760
  25,325
  28,021
  30,845
  33,798
  36,878
  40,088
  43,428
  46,902
  50,513
  54,266
  58,166
  62,219
  66,432
  70,813
  75,369
  80,111
  85,047
  90,189
  95,547
  101,134
  106,962
  113,044
  119,394
  126,027
Adjusted assets (=assets-cash), $m
  10,256
  11,983
  13,854
  15,871
  18,030
  20,327
  22,760
  25,325
  28,021
  30,845
  33,798
  36,878
  40,088
  43,428
  46,902
  50,513
  54,266
  58,166
  62,219
  66,432
  70,813
  75,369
  80,111
  85,047
  90,189
  95,547
  101,134
  106,962
  113,044
  119,394
  126,027
Revenue / Adjusted assets
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
  1.185
Average production assets, $m
  171
  199
  230
  263
  299
  337
  378
  420
  465
  512
  561
  612
  665
  720
  778
  838
  900
  965
  1,032
  1,102
  1,175
  1,250
  1,329
  1,411
  1,496
  1,585
  1,678
  1,774
  1,875
  1,981
  2,091
Working capital, $m
  0
  -1,519
  -1,757
  -2,012
  -2,286
  -2,577
  -2,886
  -3,211
  -3,553
  -3,911
  -4,285
  -4,676
  -5,083
  -5,506
  -5,947
  -6,405
  -6,881
  -7,375
  -7,889
  -8,423
  -8,979
  -9,556
  -10,158
  -10,784
  -11,436
  -12,115
  -12,823
  -13,562
  -14,333
  -15,139
  -15,980
Total debt, $m
  3,271
  4,077
  4,947
  5,885
  6,889
  7,957
  9,088
  10,281
  11,535
  12,848
  14,221
  15,653
  17,146
  18,699
  20,315
  21,994
  23,739
  25,552
  27,437
  29,396
  31,433
  33,552
  35,756
  38,052
  40,443
  42,934
  45,532
  48,242
  51,070
  54,023
  57,108
Total liabilities, $m
  4,766
  5,572
  6,442
  7,380
  8,384
  9,452
  10,583
  11,776
  13,030
  14,343
  15,716
  17,148
  18,641
  20,194
  21,810
  23,489
  25,234
  27,047
  28,932
  30,891
  32,928
  35,047
  37,251
  39,547
  41,938
  44,429
  47,027
  49,737
  52,565
  55,518
  58,603
Total equity, $m
  6,793
  6,411
  7,412
  8,491
  9,646
  10,875
  12,177
  13,549
  14,991
  16,502
  18,082
  19,730
  21,447
  23,234
  25,093
  27,025
  29,032
  31,119
  33,287
  35,541
  37,885
  40,322
  42,859
  45,500
  48,251
  51,118
  54,107
  57,225
  60,478
  63,876
  67,425
Total liabilities and equity, $m
  11,559
  11,983
  13,854
  15,871
  18,030
  20,327
  22,760
  25,325
  28,021
  30,845
  33,798
  36,878
  40,088
  43,428
  46,903
  50,514
  54,266
  58,166
  62,219
  66,432
  70,813
  75,369
  80,110
  85,047
  90,189
  95,547
  101,134
  106,962
  113,043
  119,394
  126,028
Debt-to-equity ratio
  0.482
  0.640
  0.670
  0.690
  0.710
  0.730
  0.750
  0.760
  0.770
  0.780
  0.790
  0.790
  0.800
  0.800
  0.810
  0.810
  0.820
  0.820
  0.820
  0.830
  0.830
  0.830
  0.830
  0.840
  0.840
  0.840
  0.840
  0.840
  0.840
  0.850
  0.850
Adjusted equity ratio
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535
  0.535

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  886
  1,139
  1,385
  1,651
  1,937
  2,241
  2,563
  2,903
  3,261
  3,637
  4,029
  4,445
  4,872
  5,317
  5,780
  6,261
  6,762
  7,283
  7,824
  8,387
  8,973
  9,582
  10,217
  10,878
  11,567
  12,286
  13,036
  13,818
  14,636
  15,490
  16,382
Depreciation, amort., depletion, $m
  61
  48
  54
  61
  68
  75
  84
  92
  101
  110
  120
  122
  133
  144
  156
  168
  180
  193
  206
  220
  235
  250
  266
  282
  299
  317
  336
  355
  375
  396
  418
Funds from operations, $m
  135
  1,187
  1,439
  1,712
  2,005
  2,316
  2,647
  2,995
  3,362
  3,747
  4,149
  4,567
  5,005
  5,461
  5,936
  6,429
  6,942
  7,476
  8,030
  8,607
  9,208
  9,832
  10,483
  11,160
  11,867
  12,603
  13,371
  14,173
  15,011
  15,886
  16,800
Change in working capital, $m
  -483
  -219
  -237
  -256
  -274
  -291
  -308
  -325
  -342
  -358
  -374
  -391
  -407
  -424
  -440
  -458
  -476
  -494
  -514
  -534
  -555
  -578
  -601
  -626
  -652
  -679
  -708
  -739
  -771
  -805
  -841
Cash from operations, $m
  618
  1,405
  1,677
  1,968
  2,278
  2,608
  2,955
  3,321
  3,704
  4,105
  4,524
  4,958
  5,412
  5,885
  6,376
  6,887
  7,418
  7,970
  8,544
  9,142
  9,763
  10,410
  11,084
  11,786
  12,519
  13,283
  14,080
  14,912
  15,782
  16,691
  17,641
Maintenance CAPEX, $m
  0
  -34
  -40
  -46
  -53
  -60
  -67
  -76
  -84
  -93
  -102
  -112
  -122
  -133
  -144
  -156
  -168
  -180
  -193
  -206
  -220
  -235
  -250
  -266
  -282
  -299
  -317
  -336
  -355
  -375
  -396
New CAPEX, $m
  -86
  -28
  -31
  -33
  -36
  -38
  -40
  -43
  -45
  -47
  -49
  -51
  -53
  -55
  -58
  -60
  -62
  -65
  -67
  -70
  -73
  -76
  -79
  -82
  -85
  -89
  -93
  -97
  -101
  -105
  -110
Cash from investing activities, $m
  -113
  -62
  -71
  -79
  -89
  -98
  -107
  -119
  -129
  -140
  -151
  -163
  -175
  -188
  -202
  -216
  -230
  -245
  -260
  -276
  -293
  -311
  -329
  -348
  -367
  -388
  -410
  -433
  -456
  -480
  -506
Free cash flow, $m
  505
  1,343
  1,606
  1,888
  2,190
  2,510
  2,847
  3,203
  3,575
  3,965
  4,372
  4,795
  5,236
  5,696
  6,174
  6,671
  7,188
  7,725
  8,284
  8,865
  9,470
  10,100
  10,755
  11,439
  12,151
  12,894
  13,670
  14,480
  15,326
  16,210
  17,135
Issuance/(repayment) of debt, $m
  -550
  806
  870
  938
  1,004
  1,068
  1,131
  1,193
  1,253
  1,313
  1,373
  1,432
  1,492
  1,553
  1,615
  1,679
  1,745
  1,813
  1,885
  1,959
  2,037
  2,119
  2,205
  2,295
  2,391
  2,492
  2,598
  2,710
  2,828
  2,953
  3,084
Issuance/(repurchase) of shares, $m
  72
  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
Cash from financing (excl. dividends), $m  
  -467
  806
  870
  938
  1,004
  1,068
  1,131
  1,193
  1,253
  1,313
  1,373
  1,432
  1,492
  1,553
  1,615
  1,679
  1,745
  1,813
  1,885
  1,959
  2,037
  2,119
  2,205
  2,295
  2,391
  2,492
  2,598
  2,710
  2,828
  2,953
  3,084
Total cash flow (excl. dividends), $m
  38
  2,149
  2,476
  2,826
  3,194
  3,578
  3,979
  4,396
  4,829
  5,279
  5,745
  6,227
  6,729
  7,249
  7,790
  8,351
  8,933
  9,539
  10,169
  10,824
  11,507
  12,218
  12,960
  13,734
  14,542
  15,386
  16,268
  17,190
  18,154
  19,163
  20,220
Retained Cash Flow (-), $m
  -899
  -921
  -1,001
  -1,079
  -1,155
  -1,229
  -1,302
  -1,372
  -1,442
  -1,511
  -1,580
  -1,648
  -1,717
  -1,787
  -1,859
  -1,932
  -2,008
  -2,086
  -2,168
  -2,254
  -2,344
  -2,438
  -2,537
  -2,641
  -2,751
  -2,867
  -2,989
  -3,118
  -3,254
  -3,397
  -3,549
Prev. year cash balance distribution, $m
 
  1,303
  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
 
  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
Cash available for distribution, $m
 
  2,532
  1,475
  1,747
  2,039
  2,349
  2,677
  3,023
  3,387
  3,768
  4,166
  4,579
  5,012
  5,462
  5,931
  6,419
  6,925
  7,452
  8,000
  8,570
  9,163
  9,781
  10,423
  11,093
  11,791
  12,519
  13,279
  14,072
  14,900
  15,766
  16,671
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
 
  2,427
  1,350
  1,520
  1,679
  1,821
  1,943
  2,042
  2,117
  2,164
  2,184
  2,174
  2,139
  2,077
  1,991
  1,884
  1,760
  1,622
  1,473
  1,320
  1,164
  1,012
  865
  727
  601
  487
  387
  302
  231
  172
  126
Current shareholders' claim on cash, %
  100
  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 18
Price to Sales 1.3
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 25.7
Price to Free Cash Flow 29.9
Growth Rates
Sales Growth Rate 12.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 53.6%
Cap. Spend. - 3 Yr. Gr. Rate 8.2%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 48.2%
Total Debt to Equity 48.2%
Interest Coverage 0
Management Effectiveness
Return On Assets 7.8%
Ret/ On Assets - 3 Yr. Avg. 6.8%
Return On Total Capital 9%
Ret/ On T. Cap. - 3 Yr. Avg. 7.9%
Return On Equity 14%
Return On Equity - 3 Yr. Avg. 13.1%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 21.9%
Gross Margin - 3 Yr. Avg. 21.7%
EBITDA Margin 11.6%
EBITDA Margin - 3 Yr. Avg. 11%
Operating Margin 11.1%
Oper. Margin - 3 Yr. Avg. 10.5%
Pre-Tax Margin 11.1%
Pre-Tax Margin - 3 Yr. Avg. 10.6%
Net Profit Margin 7.3%
Net Profit Margin - 3 Yr. Avg. 7%
Effective Tax Rate 34.6%
Eff/ Tax Rate - 3 Yr. Avg. 34%
Payout Ratio 13.4%

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 $12157 million for the last fiscal year's total revenue generated by D.R. Horton. The default revenue input number comes from 2016 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 16.8% 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 82.7%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $764 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 3.5% 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%.

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 1.4%.

Life of production assets of 4.2 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 -10.7%. 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 - $6793 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 378.424 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 $16.1 billion.

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CHCI Comstock Holdi 1.68 6.39  str.buy
TOL Toll Brothers 44.21 63.63  str.buy
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COMPANY NEWS

▶ Housing Industry Stock Outlook - October 2017   [Oct-09-17 05:49PM  Zacks]
▶ Millennials Graduate From Parents' Basements Into Smart Homes   [08:49AM  Investor's Business Daily]
▶ [$$] A Surprising Tailwind for Home Builders   [Oct-06-17 02:53PM  Barrons.com]
▶ D.R. Horton Is Lonely Homebuilder In Big Cap 20: Why?   [01:05PM  Investor's Business Daily]
▶ Millennials Graduate From Parents' Basements Into Smart Homes   [01:00PM  Investor's Business Daily]
▶ Should You Buy DR Horton Inc (DHI) At $37.16?   [Sep-14-17 02:43PM  Simply Wall St.]
▶ What Texas Can Tell Us About The Housing Market   [Aug-23-17 12:08PM  Barrons.com]
▶ The 5 US housing markets Chinese investors like most   [Aug-21-17 01:55PM  Yahoo Finance]
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▶ Pay Attention to These Cracks in the Housing Sector   [Aug-18-17 12:10PM  InvestorPlace]
▶ July Housing Starts Weaker Than Expected   [07:14AM  Investor's Business Daily]
▶ ETFs with exposure to D.R. Horton, Inc. : August 11, 2017   [Aug-11-17 05:16PM  Capital Cube]
▶ D.R. Horton Is Building Toward the $50 Mark   [Aug-03-17 04:01PM  TheStreet.com]
▶ As Homebuilders Wrap Up Earnings Season, 3 Key Names Yet To Report   [Jul-31-17 07:00PM  Investor's Business Daily]
▶ New Home Sales Up in June   [Jul-27-17 06:38PM  GuruFocus.com]
▶ D.R. Horton tops Street 3Q forecasts   [Jul-26-17 09:55PM  Associated Press]
▶ Top-Rated Stock In Top-10 Group Just Beat Earnings Views   [04:24PM  Investor's Business Daily]
▶ U.S. home sales stumble as prices hit record high   [Jul-24-17 12:57PM  Reuters]
▶ Don't Be Greedy! Take What The Market Will Give You   [Jul-21-17 03:40PM  Investor's Business Daily]
▶ National homebuilder to pay Miami-Dade condo association $11M in settlement   [Jul-13-17 12:43PM  American City Business Journals]
▶ No. 2-Ranked Homebuilder Constructs Successful Breakout   [Jul-11-17 04:27PM  Investor's Business Daily]
▶ This Top-Ranked Industry Just Got A Slew Of Stock Rating Upgrades   [Jul-10-17 04:26PM  Investor's Business Daily]
▶ The Hot Stock: D.R. Horton Gains 3.8%   [Jul-07-17 05:00PM  Barrons.com]
▶ These 2 Stocks With 95+ Composite Ratings Enter Buy Zones   [04:24PM  Investor's Business Daily]
Financial statements of DHI
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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