Jump to content

Anyone familiar with home builder stocks?


muscleman
 Share

Recommended Posts

I see some home builders are growing at 6% and some are at 20%. Not sure if there is any risk with the higher grower ones like the banks do.

Some builders claim to be "asset light" and I don't understand how a home builder can be asset light.

 

I wonder if anyone could share some insights?

Link to comment
Share on other sites

An "asset-light" home builder typically is one that does not have a large, on-balance-sheet land bank.  Instead, they, for example, will use option contracts to control large amounts of land.  NVR is an example of this asset-light model. 

 

The other area where home builders and sink alot of assets is inventory, i.e., homes that are built or in the process of being built.  That is a reason some home builders produce no free cash flow despite substantial earnings.  In theory, this working capital drag should ease as growth slows (or even goes negative), but that is the same point in the cycle at which you start to get inventory writedowns (and either land-bank writedowns or write-offs of land options).

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...