Intrinsic value of PulteGroup - PHM

Previous Close

$28.00

  Intrinsic Value

$100.16

stock screener

  Rating & Target

str. buy

+258%

  Value-price divergence*

-103%

Previous close

$28.00

 
Intrinsic value

$100.16

 
Up/down potential

+258%

 
Rating

str. buy

 
Value-price divergence*

-103%

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

We calculate the intrinsic value of PHM 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 8.6

 

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, %
  28.18
  28.20
  25.88
  23.79
  21.91
  20.22
  18.70
  17.33
  16.10
  14.99
  13.99
  13.09
  12.28
  11.55
  10.90
  10.31
  9.78
  9.30
  8.87
  8.48
  8.13
  7.82
  7.54
  7.28
  7.06
  6.85
  6.67
  6.50
  6.35
  6.21
  6.09
Revenue, $m
  7,668
  9,830
  12,374
  15,319
  18,675
  22,452
  26,650
  31,268
  36,302
  41,742
  47,581
  53,809
  60,417
  67,397
  74,741
  82,445
  90,505
  98,921
  107,695
  116,829
  126,332
  136,212
  146,481
  157,151
  168,240
  179,766
  191,748
  204,209
  217,175
  230,670
  244,725
Variable operating expenses, $m
 
  8,493
  10,692
  13,235
  16,136
  19,398
  23,026
  27,016
  31,365
  36,065
  41,110
  46,491
  52,200
  58,231
  64,576
  71,232
  78,196
  85,468
  93,048
  100,941
  109,151
  117,687
  126,559
  135,779
  145,359
  155,317
  165,670
  176,437
  187,639
  199,299
  211,442
Fixed operating expenses, $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 operating expenses, $m
  6,735
  8,493
  10,692
  13,235
  16,136
  19,398
  23,026
  27,016
  31,365
  36,065
  41,110
  46,491
  52,200
  58,231
  64,576
  71,232
  78,196
  85,468
  93,048
  100,941
  109,151
  117,687
  126,559
  135,779
  145,359
  155,317
  165,670
  176,437
  187,639
  199,299
  211,442
Operating income, $m
  934
  1,337
  1,683
  2,083
  2,540
  3,053
  3,624
  4,253
  4,937
  5,677
  6,471
  7,318
  8,217
  9,166
  10,165
  11,212
  12,309
  13,453
  14,646
  15,889
  17,181
  18,525
  19,921
  21,373
  22,881
  24,448
  26,078
  27,772
  29,536
  31,371
  33,283
EBITDA, $m
  988
  1,392
  1,752
  2,169
  2,644
  3,179
  3,774
  4,428
  5,140
  5,911
  6,737
  7,619
  8,555
  9,543
  10,583
  11,674
  12,816
  14,007
  15,250
  16,543
  17,889
  19,288
  20,742
  22,253
  23,823
  25,455
  27,151
  28,916
  30,752
  32,663
  34,653
Interest expense (income), $m
  27
  109
  159
  218
  287
  365
  452
  550
  657
  774
  901
  1,036
  1,181
  1,334
  1,497
  1,667
  1,846
  2,033
  2,229
  2,433
  2,645
  2,866
  3,095
  3,334
  3,582
  3,839
  4,107
  4,386
  4,675
  4,976
  5,290
Earnings before tax, $m
  934
  1,228
  1,524
  1,865
  2,253
  2,689
  3,172
  3,703
  4,280
  4,903
  5,570
  6,282
  7,036
  7,832
  8,668
  9,545
  10,463
  11,420
  12,418
  13,456
  14,536
  15,659
  16,826
  18,039
  19,299
  20,609
  21,971
  23,387
  24,861
  26,395
  27,993
Tax expense, $m
  331
  332
  411
  504
  608
  726
  856
  1,000
  1,156
  1,324
  1,504
  1,696
  1,900
  2,115
  2,340
  2,577
  2,825
  3,083
  3,353
  3,633
  3,925
  4,228
  4,543
  4,870
  5,211
  5,564
  5,932
  6,314
  6,712
  7,127
  7,558
Net income, $m
  603
  896
  1,112
  1,362
  1,645
  1,963
  2,316
  2,703
  3,124
  3,579
  4,066
  4,586
  5,136
  5,717
  6,328
  6,968
  7,638
  8,336
  9,065
  9,823
  10,611
  11,431
  12,283
  13,168
  14,088
  15,044
  16,039
  17,072
  18,148
  19,268
  20,435

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  699
  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
  10,178
  12,151
  15,296
  18,935
  23,084
  27,753
  32,942
  38,651
  44,872
  51,597
  58,815
  66,513
  74,681
  83,308
  92,387
  101,909
  111,873
  122,276
  133,121
  144,412
  156,159
  168,371
  181,064
  194,254
  207,961
  222,207
  237,018
  252,422
  268,449
  285,130
  302,503
Adjusted assets (=assets-cash), $m
  9,479
  12,151
  15,296
  18,935
  23,084
  27,753
  32,942
  38,651
  44,872
  51,597
  58,815
  66,513
  74,681
  83,308
  92,387
  101,909
  111,873
  122,276
  133,121
  144,412
  156,159
  168,371
  181,064
  194,254
  207,961
  222,207
  237,018
  252,422
  268,449
  285,130
  302,503
Revenue / Adjusted assets
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
  0.809
Average production assets, $m
  214
  275
  346
  429
  523
  629
  746
  876
  1,016
  1,169
  1,332
  1,507
  1,692
  1,887
  2,093
  2,308
  2,534
  2,770
  3,015
  3,271
  3,537
  3,814
  4,101
  4,400
  4,711
  5,033
  5,369
  5,718
  6,081
  6,459
  6,852
Working capital, $m
  0
  -344
  -433
  -536
  -654
  -786
  -933
  -1,094
  -1,271
  -1,461
  -1,665
  -1,883
  -2,115
  -2,359
  -2,616
  -2,886
  -3,168
  -3,462
  -3,769
  -4,089
  -4,422
  -4,767
  -5,127
  -5,500
  -5,888
  -6,292
  -6,711
  -7,147
  -7,601
  -8,073
  -8,565
Total debt, $m
  3,541
  4,547
  6,236
  8,190
  10,418
  12,925
  15,712
  18,777
  22,118
  25,730
  29,605
  33,739
  38,126
  42,759
  47,634
  52,747
  58,098
  63,684
  69,508
  75,571
  81,879
  88,437
  95,253
  102,336
  109,697
  117,347
  125,301
  133,573
  142,179
  151,137
  160,466
Total liabilities, $m
  5,519
  6,525
  8,214
  10,168
  12,396
  14,903
  17,690
  20,755
  24,096
  27,708
  31,583
  35,717
  40,104
  44,737
  49,612
  54,725
  60,076
  65,662
  71,486
  77,549
  83,857
  90,415
  97,231
  104,314
  111,675
  119,325
  127,279
  135,551
  144,157
  153,115
  162,444
Total equity, $m
  4,659
  5,626
  7,082
  8,767
  10,688
  12,849
  15,252
  17,895
  20,776
  23,889
  27,231
  30,796
  34,577
  38,572
  42,775
  47,184
  51,797
  56,614
  61,635
  66,863
  72,301
  77,956
  83,833
  89,939
  96,286
  102,882
  109,739
  116,871
  124,292
  132,015
  140,059
Total liabilities and equity, $m
  10,178
  12,151
  15,296
  18,935
  23,084
  27,752
  32,942
  38,650
  44,872
  51,597
  58,814
  66,513
  74,681
  83,309
  92,387
  101,909
  111,873
  122,276
  133,121
  144,412
  156,158
  168,371
  181,064
  194,253
  207,961
  222,207
  237,018
  252,422
  268,449
  285,130
  302,503
Debt-to-equity ratio
  0.760
  0.810
  0.880
  0.930
  0.970
  1.010
  1.030
  1.050
  1.060
  1.080
  1.090
  1.100
  1.100
  1.110
  1.110
  1.120
  1.120
  1.120
  1.130
  1.130
  1.130
  1.130
  1.140
  1.140
  1.140
  1.140
  1.140
  1.140
  1.140
  1.140
  1.150
Adjusted equity ratio
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463
  0.463

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  603
  896
  1,112
  1,362
  1,645
  1,963
  2,316
  2,703
  3,124
  3,579
  4,066
  4,586
  5,136
  5,717
  6,328
  6,968
  7,638
  8,336
  9,065
  9,823
  10,611
  11,431
  12,283
  13,168
  14,088
  15,044
  16,039
  17,072
  18,148
  19,268
  20,435
Depreciation, amort., depletion, $m
  54
  55
  69
  86
  105
  126
  149
  175
  203
  234
  266
  301
  338
  377
  419
  462
  507
  554
  603
  654
  707
  763
  820
  880
  942
  1,007
  1,074
  1,144
  1,216
  1,292
  1,370
Funds from operations, $m
  -899
  952
  1,182
  1,447
  1,749
  2,089
  2,465
  2,878
  3,328
  3,813
  4,333
  4,887
  5,474
  6,094
  6,746
  7,430
  8,144
  8,890
  9,668
  10,477
  11,319
  12,194
  13,103
  14,048
  15,030
  16,051
  17,112
  18,216
  19,365
  20,560
  21,805
Change in working capital, $m
  -967
  -76
  -89
  -103
  -117
  -132
  -147
  -162
  -176
  -190
  -204
  -218
  -231
  -244
  -257
  -270
  -282
  -295
  -307
  -320
  -333
  -346
  -359
  -373
  -388
  -403
  -419
  -436
  -454
  -472
  -492
Cash from operations, $m
  68
  1,027
  1,271
  1,550
  1,867
  2,221
  2,612
  3,040
  3,504
  4,003
  4,537
  5,105
  5,706
  6,339
  7,003
  7,699
  8,427
  9,185
  9,975
  10,797
  11,651
  12,540
  13,463
  14,422
  15,418
  16,454
  17,532
  18,652
  19,818
  21,032
  22,297
Maintenance CAPEX, $m
  0
  -43
  -55
  -69
  -86
  -105
  -126
  -149
  -175
  -203
  -234
  -266
  -301
  -338
  -377
  -419
  -462
  -507
  -554
  -603
  -654
  -707
  -763
  -820
  -880
  -942
  -1,007
  -1,074
  -1,144
  -1,216
  -1,292
New CAPEX, $m
  -39
  -61
  -71
  -82
  -94
  -106
  -118
  -129
  -141
  -152
  -163
  -174
  -185
  -195
  -206
  -216
  -226
  -236
  -246
  -256
  -266
  -277
  -288
  -299
  -310
  -323
  -336
  -349
  -363
  -378
  -394
Cash from investing activities, $m
  -471
  -104
  -126
  -151
  -180
  -211
  -244
  -278
  -316
  -355
  -397
  -440
  -486
  -533
  -583
  -635
  -688
  -743
  -800
  -859
  -920
  -984
  -1,051
  -1,119
  -1,190
  -1,265
  -1,343
  -1,423
  -1,507
  -1,594
  -1,686
Free cash flow, $m
  -403
  923
  1,144
  1,399
  1,687
  2,010
  2,368
  2,761
  3,188
  3,648
  4,140
  4,664
  5,219
  5,805
  6,420
  7,065
  7,739
  8,443
  9,175
  9,938
  10,731
  11,556
  12,412
  13,303
  14,228
  15,190
  16,189
  17,229
  18,312
  19,438
  20,612
Issuance/(repayment) of debt, $m
  1,073
  1,437
  1,689
  1,954
  2,228
  2,507
  2,787
  3,066
  3,341
  3,611
  3,876
  4,134
  4,386
  4,633
  4,875
  5,114
  5,350
  5,586
  5,824
  6,064
  6,308
  6,558
  6,816
  7,083
  7,361
  7,650
  7,954
  8,272
  8,606
  8,958
  9,329
Issuance/(repurchase) of shares, $m
  -597
  339
  344
  323
  276
  198
  87
  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  
  476
  1,776
  2,033
  2,277
  2,504
  2,705
  2,874
  3,066
  3,341
  3,611
  3,876
  4,134
  4,386
  4,633
  4,875
  5,114
  5,350
  5,586
  5,824
  6,064
  6,308
  6,558
  6,816
  7,083
  7,361
  7,650
  7,954
  8,272
  8,606
  8,958
  9,329
Total cash flow (excl. dividends), $m
  73
  2,699
  3,177
  3,676
  4,192
  4,716
  5,242
  5,827
  6,529
  7,259
  8,016
  8,798
  9,606
  10,438
  11,295
  12,179
  13,090
  14,029
  14,999
  16,002
  17,039
  18,114
  19,228
  20,386
  21,589
  22,840
  24,143
  25,501
  26,918
  28,396
  29,941
Retained Cash Flow (-), $m
  100
  -1,235
  -1,456
  -1,685
  -1,921
  -2,161
  -2,403
  -2,643
  -2,881
  -3,114
  -3,342
  -3,564
  -3,782
  -3,994
  -4,203
  -4,409
  -4,613
  -4,817
  -5,021
  -5,228
  -5,439
  -5,654
  -5,877
  -6,107
  -6,346
  -6,596
  -6,858
  -7,132
  -7,420
  -7,724
  -8,043
Prev. year cash balance distribution, $m
 
  268
  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
 
  1,732
  1,721
  1,991
  2,270
  2,554
  2,840
  3,184
  3,648
  4,145
  4,674
  5,234
  5,824
  6,443
  7,092
  7,770
  8,476
  9,212
  9,978
  10,774
  11,600
  12,459
  13,352
  14,279
  15,242
  16,244
  17,286
  18,369
  19,498
  20,673
  21,897
Discount rate, %
 
  5.80
  6.09
  6.39
  6.71
  7.05
  7.40
  7.77
  8.16
  8.57
  9.00
  9.45
  9.92
  10.42
  10.94
  11.48
  12.06
  12.66
  13.29
  13.96
  14.66
  15.39
  16.16
  16.97
  17.81
  18.71
  19.64
  20.62
  21.65
  22.74
  23.87
PV of cash for distribution, $m
 
  1,637
  1,529
  1,653
  1,751
  1,817
  1,850
  1,885
  1,948
  1,978
  1,975
  1,939
  1,872
  1,777
  1,659
  1,521
  1,371
  1,214
  1,055
  900
  753
  617
  495
  388
  298
  223
  163
  116
  81
  54
  36
Current shareholders' claim on cash, %
  100
  96.0
  92.9
  90.7
  89.1
  88.2
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9
  87.9

PulteGroup, Inc. is a homebuilder in the United States. The Company's segments include Homebuilding and Financial Services. Its Homebuilding operations are engaged in the acquisition and development of land primarily for residential purposes within the United States and the construction of housing on such land. Its Financial Services operations consist principally of mortgage banking and title operations. The Company conducts its financial services business, through Pulte Mortgage LLC (Pulte Mortgage) and other subsidiaries. Pulte Mortgage arranges financing through the origination of mortgage loans. The Company's subsidiaries are engaged in the homebuilding business. It offers a product line to meet the needs of homebuyers in its focused markets. Through its brands, which include Centex, Pulte Homes, Del Webb, DiVosta Homes, and John Wieland Homes and Neighborhoods, the Company offers a range of home designs, including single-family detached, townhouses, condominiums and duplexes.

FINANCIAL RATIOS  of  PulteGroup (PHM)

Valuation Ratios
P/E Ratio 14.8
Price to Sales 1.2
Price to Book 1.9
Price to Tangible Book
Price to Cash Flow 131.4
Price to Free Cash Flow 308.1
Growth Rates
Sales Growth Rate 28.2%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -13.3%
Cap. Spend. - 3 Yr. Gr. Rate 6.1%
Financial Strength
Quick Ratio 2
Current Ratio NaN
LT Debt to Equity 66.8%
Total Debt to Equity 76%
Interest Coverage 36
Management Effectiveness
Return On Assets 6.4%
Ret/ On Assets - 3 Yr. Avg. 5.8%
Return On Total Capital 7.9%
Ret/ On T. Cap. - 3 Yr. Avg. 7.3%
Return On Equity 12.8%
Return On Equity - 3 Yr. Avg. 11.1%
Asset Turnover 0.8
Profitability Ratios
Gross Margin 25.3%
Gross Margin - 3 Yr. Avg. 24.3%
EBITDA Margin 13.2%
EBITDA Margin - 3 Yr. Avg. 13.4%
Operating Margin 12.2%
Oper. Margin - 3 Yr. Avg. 12.5%
Pre-Tax Margin 12.2%
Pre-Tax Margin - 3 Yr. Avg. 12.6%
Net Profit Margin 7.9%
Net Profit Margin - 3 Yr. Avg. 8.1%
Effective Tax Rate 35.4%
Eff/ Tax Rate - 3 Yr. Avg. 35.4%
Payout Ratio 20.7%

PHM stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the PHM stock intrinsic value calculation we used $7668 million for the last fiscal year's total revenue generated by PulteGroup. The default revenue input number comes from 2016 income statement of PulteGroup. 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 PHM stock valuation model: a) initial revenue growth rate of 28.2% 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 5.8%, whose default value for PHM is calculated based on our internal credit rating of PulteGroup, 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 PulteGroup.
    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 PHM stock the variable cost ratio is equal to 86.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for PHM 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 PulteGroup.

Corporate tax rate of 27% is the nominal tax rate for PulteGroup. 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 PHM 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 PHM are equal to 2.8%.

Life of production assets of 4 years is the average useful life of capital assets used in PulteGroup 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 PHM is equal to -3.5%. 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 - $4659 million for PulteGroup - 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 306.598 million for PulteGroup 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 PulteGroup at the current share price and the inputted number of shares is $8.6 billion.

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COMPANY NEWS

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▶ Pay Attention to These Cracks in the Housing Sector   [Aug-18-17 12:10PM  InvestorPlace]
▶ 4 Things PulteGroup's Mangement Thinks You Should Know   [Aug-14-17 07:43PM  Motley Fool]
▶ ETFs with exposure to PulteGroup, Inc. : August 8, 2017   [Aug-08-17 05:02PM  Capital Cube]
▶ As Homebuilders Wrap Up Earnings Season, 3 Key Names Yet To Report   [Jul-31-17 07:00PM  Investor's Business Daily]
▶ Top-Rated Stock In Top-10 Group Just Beat Earnings Views   [Jul-26-17 04:24PM  Investor's Business Daily]
▶ PulteGroup tops 2Q profit forecasts   [Jul-25-17 09:48PM  Associated Press]
▶ PEG Ratio vs. the P/E Ratio   [02:32PM  Zacks]
▶ U.S. home sales stumble as prices hit record high   [Jul-24-17 12:57PM  Reuters]
▶ Housing Stocks Could Blow Over Soon for a Number of Reasons   [Jul-15-17 03:11PM  TheStreet.com]
▶ [$$] US homebuilders retreat after Barclays downgrades   [Jul-11-17 04:36PM  Financial Times]
▶ No. 2-Ranked Homebuilder Constructs Successful Breakout   [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]
▶ Mizuho Cuts KB Home, PulteGroup To Sell   [09:58AM  Barrons.com]
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▶ These 2 Stocks With 95+ Composite Ratings Enter Buy Zones   [04:24PM  Investor's Business Daily]
▶ As Homebuilders Show Strength, This Breakout Stock Gets Upgraded   [Jul-03-17 12:32PM  Investor's Business Daily]
Financial statements of PHM
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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