Critical Review: New Home Company Inc. (The) (NWHM) versus Beazer Homes USA (BZH)

New Home Company Inc. (The) (NYSE: NWHM) and Beazer Homes USA (NYSE:BZH) are both small-cap construction companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, institutional ownership, earnings, risk, dividends and valuation.

Volatility and Risk

New Home Company Inc. (The) has a beta of 1.9, suggesting that its share price is 90% more volatile than the S&P 500. Comparatively, Beazer Homes USA has a beta of 2.71, suggesting that its share price is 171% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for New Home Company Inc. (The) and Beazer Homes USA, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
New Home Company Inc. (The) 0 0 0 0 N/A
Beazer Homes USA 1 3 1 0 2.00

Beazer Homes USA has a consensus target price of $16.33, indicating a potential downside of 15.15%. Given Beazer Homes USA’s higher probable upside, analysts clearly believe Beazer Homes USA is more favorable than New Home Company Inc. (The).

Institutional and Insider Ownership

57.2% of New Home Company Inc. (The) shares are held by institutional investors. Comparatively, 80.7% of Beazer Homes USA shares are held by institutional investors. 24.2% of New Home Company Inc. (The) shares are held by company insiders. Comparatively, 7.6% of Beazer Homes USA shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares New Home Company Inc. (The) and Beazer Homes USA’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
New Home Company Inc. (The) $769.49 million 0.31 $36.07 million $1.04 11.06
Beazer Homes USA $1.88 billion 0.33 $74.43 million ($0.08) -240.59

Beazer Homes USA has higher revenue and earnings than New Home Company Inc. (The). Beazer Homes USA is trading at a lower price-to-earnings ratio than New Home Company Inc. (The), indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares New Home Company Inc. (The) and Beazer Homes USA’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
New Home Company Inc. (The) 2.82% 10.25% 4.74%
Beazer Homes USA -0.14% 3.01% 0.88%

Summary

Beazer Homes USA beats New Home Company Inc. (The) on 8 of the 13 factors compared between the two stocks.

New Home Company Inc. (The) Company Profile

The New Home Company Inc. is a homebuilding company. The Company focuses on the design, construction and sale of consumer-driven homes in various metropolitan areas within certain markets in California and Arizona, including coastal Southern California, the San Francisco Bay area, metro Sacramento and the greater Phoenix area. The Company’s segments include homebuilding and fee building. The homebuilding operations consist of divisions in Northern California, Southern California and its division in Arizona, which is established through the purchase of lots in an unconsolidated joint venture. The Company is focused on building and selling homes for its own account. It is focused on identifying sites and creating communities that allow it to design, construct and sell consumer-driven single-family detached and attached homes in major metropolitan areas in coastal Southern California, the San Francisco Bay area, metro Sacramento and the greater Phoenix area.

Beazer Homes USA Company Profile

Beazer Homes USA, Inc. is a geographically diversified homebuilder. As of September 30, 2016, the Company had operations in 13 states within over three geographic regions in the United States. The Company’s segments include West, East and Southeast. The Company markets and sells its products through its Website, www.beazer.com; mobile site, m.beazer.com; real estate listing sites, online advertising, including search engine marketing and display advertising, social media, video, brochures, direct marketing and out-of-home advertising, including billboards and signage, as well as other activities. It offers lender choice and personalization. The Company’s Choice Plans allows buyers to choose living areas, such as the kitchen and master bathroom. Its West segment includes Arizona, California, Nevada and Texas. Its East segment includes Indiana, Maryland/Delaware, Tennessee and Virginia. Its Southeast segment includes Florida, Georgia, North Carolina and South Carolina.

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