Ricardo Pillai
3 min read
In This Article:
We came across a bullish thesis on D.R. Horton, Inc. (DHI) on Substack by Let it Compound. In this article, we will summarize the bulls’ thesis on DHI. D.R. Horton, Inc. (DHI)'s share was trading at $125.75 as of May 16th. DHI’s trailing and forward P/E were 9.53 and 11.05 respectively according to Yahoo Finance.
A builder wearing a hard hat admiring a newly constructed smart home.
D.R. Horton (DHI), the largest homebuilder in the U.S., commands a significant presence by closing nearly 94,000 homes in fiscal 2024—about one in every seven single-family homes sold nationwide. Operating in 125 markets across 36 states with a decentralized model of 92 local divisions, DHI tailors its four main home lines to diverse buyer needs, ranging from entry-level to luxury and 55+ communities. Most revenue stems from single-family home sales, supported by additional contributions from non-single-family housing, a growing rental business, and a 62% stake in Forestar Group, a lot developer. Take a look at what we found about Forestar.
Notably, DHI Mortgage financed 78% of 2024 closings, facilitating transactions without heavily contributing to revenue. A key strength lies in the Horton family’s 8.5% insider ownership, which aligns management with long-term shareholder value. DHI’s prudent capital approach includes shifting from land ownership to option contracts, enhancing capital efficiency and lowering debt risk, while maintaining quality and operational discipline. This strategy has enabled consistent dividends since 1997 and significant share repurchases, with $500 million planned for dividends in 2025, doubling 2020 levels.
Financially robust, DHI boasts strong returns, low leverage, and resilient margins, generating $4.7 billion net income in 2024 despite industry-wide margin pressures from buyer incentives. The company’s decentralized model enables local market responsiveness, supporting steady, profitable growth. Looking ahead, management forecasts stable revenues near $36-$37.5 billion and consistent home closings in 2025, with cash flow poised to improve. Challenges include elevated inventory in key regions, which may pressure pricing and margins short term, but disciplined execution and solid fundamentals position DHI as a high-quality compounder with an estimated 27.5% upside, balancing attractive long-term growth against manageable near-term risks.
D.R. Horton, Inc. (DHI) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 60 hedge fund portfolios held DHI at the end of the fourth quarter which was 69 in the previous quarter. While we acknowledge the risk and potential of DHI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than DHI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
