Century Communities (CCS): Valuation Insights Following Strong Q3 Results and Improved Margins

Century Communities (CCS) just wrapped up their third quarter, reporting revenue that topped forecasts and delivering 2,486 homes, which met the upper range of their guidance. Investors are paying close attention as the company also achieved a slight improvement in homebuilding gross margins and managed to refinance its senior notes at a lower interest rate.

See our latest analysis for Century Communities.

Despite cautious guidance and some normalization in earnings, Century Communities has been steadily introducing new communities and returning capital to shareholders through buybacks. The stock’s recent momentum is noteworthy, with the 7-day share price return up 5.7% and the 90-day share price return climbing 8.4%. However, one-year total shareholder return stands at -29.6%, reflecting the impact of shifting sentiment over the longer term. Fresh product launches and improved margins hint at gradual recovery potential.

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With shares rebounding recently even as annual results remain muted, investors may wonder whether Century Communities is now trading at a bargain or if the market has already factored in any future recovery and growth. Is there still a buying opportunity, or has everything been priced in?

Most Popular Narrative: 4% Undervalued

Century Communities' most widely followed narrative sees the fair value at $66, slightly above its recent close of $63.27, hinting at modest upside amid improving operational metrics and forecasts. This sets an interesting stage for a key insight that explains the heart of the narrative's bullish view.

Strong operational efficiency, a growing community footprint, and a flexible land strategy position Century Communities for long-term growth despite ongoing affordability challenges in the housing market.

Read the complete narrative.

Want to know the financial formula supporting that valuation? This narrative is anchored by anticipated bottom-line growth, sharper margins, and an earnings multiple that stands out from historical norms. What number did they bet on for future profits? Click to uncover the details driving this fair value estimate.

Result: Fair Value of $66 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, strong underlying US housing demand and Century’s expanding community count could counter these headwinds and provide lasting support for future sales growth.

Find out about the key risks to this Century Communities narrative.

Another View: Testing the Valuation with SWS DCF Model

While the fair value narrative relies on future earnings and profit multiples, the SWS DCF model tells a more cautious story. According to this approach, Century Communities' current share price is above the estimate of fair value, suggesting the stock could be overvalued by this measure. Could the market be missing something, or is caution still warranted?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Century Communities for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Century Communities Narrative

If you want to take the data in a different direction or craft your own perspective, you can build your own view in just a few minutes. Do it your way

A great starting point for your Century Communities research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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