Is D.R. Horton Ready for a Rebound After the Recent Share Price Dip?

Simply Wall St

Thinking about what to do with D.R. Horton stock? You are definitely not alone. The homebuilder’s shares have been on quite a ride lately. While there was a 1.0% uptick in the last week, the past month has seen a dip of 5.6%, reminding investors that even industry leaders can hit a few speed bumps. But zoom out and the long-term story looks impressive. The stock returned 130.0% over five years and a remarkable 144.5% over the past three. Even after a modest retracement this year, D.R. Horton is up 24.6% year to date, showing there is still plenty of momentum left in the tank.

What is driving these moves? Much of the action lines up with wider housing market dynamics. Shifting mortgage rates and mixed signals from economic data have made investors occasionally more cautious about homebuilder stocks, but the long-term demand for new homes seems firmly intact. These swings can make the stock feel slightly unpredictable, but for patient investors, they might open up interesting buying opportunities, especially if the fundamentals make sense.

If you are wondering about value, D.R. Horton earns a valuation score of 2 out of 6 when screened for typical undervaluation metrics. So by the numbers, it’s undervalued in two out of six checks, not a screaming bargain, but not overly expensive either. So, how do different valuation methods stack up for D.R. Horton? Let’s take a look at the most common approaches, and stay tuned for a more insightful perspective at the end of the article.

D.R. Horton scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: D.R. Horton Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model is all about projecting a company’s future cash flows and then discounting those amounts back to today’s dollars. This helps investors estimate what a business is really worth, based not just on current profits but on its future ability to generate cash.

For D.R. Horton, the most recently reported Free Cash Flow stands at just over $2.76 billion. Analysts have growth expectations for this number, with cash flows projected to reach $3.1 billion by 2026. Models extrapolate continued growth out for the next decade. By 2035, annual Free Cash Flow is forecast to rise to roughly $4.58 billion. These estimates combine both analyst forecasts and algorithmic projections to give a smooth picture of potential growth.

When Simply Wall St ran its two-stage DCF model, the result was an estimated intrinsic value of $209.53 per share. Compared to the current stock price, the analysis suggests the shares are trading about 18.1% below their fair value. In other words, based strictly on expected future cash flows, D.R. Horton appears to offer investors an attractive margin of safety.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for D.R. Horton.

DHI Discounted Cash Flow as at Oct 2025

Our Discounted Cash Flow (DCF) analysis suggests D.R. Horton is undervalued by 18.1%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: D.R. Horton Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation tool for profitable companies because it measures how much investors are willing to pay for each dollar of a company's earnings. For companies like D.R. Horton with a solid track record of generating profits, the PE ratio offers a quick sense of whether the stock is cheap or expensive relative to its earnings power.

Interpreting what counts as a “normal” or “fair” PE ratio depends on several factors. Higher growth expectations, lower risks, and stronger profitability usually justify a higher PE, while the reverse leads to lower valuations. For D.R. Horton, the current PE ratio stands at 12.9x. That is just above the Consumer Durables industry average of 11.2x and is also higher than the peer group average at 11.7x.

Simply Wall St’s proprietary "Fair Ratio" provides another perspective. The Fair Ratio for D.R. Horton is calculated at 20.6x, and this figure takes into account much more than industry averages, including its earnings growth, profit margin, scale, industry, and assessed risks. This approach gives a more nuanced and company-specific perspective compared to simply comparing with the sector or competitors.

Since D.R. Horton's current PE (12.9x) is meaningfully below its Fair Ratio (20.6x), the numbers suggest the shares are undervalued on this metric alone.

Result: UNDERVALUED

NYSE:DHI PE Ratio as at Oct 2025

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your D.R. Horton Narrative

Earlier we mentioned that there's an even better way to understand valuation. Let us introduce you to Narratives. A Narrative is your unique perspective—a story behind the numbers—that connects what you believe about a company like D.R. Horton to your own financial forecast and fair value, not just the formulas or analyst averages.

With Narratives, you combine your view of the business, such as future revenue, earnings, and margins, with the underlying reasons driving those assumptions. This approach links a company's story to its expected financial outcomes, making investment decisions far more personal and grounded in your conviction.

Available on Simply Wall St's Community page, Narratives are an easy, accessible way millions of investors weigh up their opinions and see how their fair value stacks up against the current share price. This helps you spot whether now is a buying or selling opportunity. As new information comes in, like fresh earnings or company news, Narratives update dynamically so your fair value always reflects the latest facts and forecasts.

For example, some investors believe D.R. Horton's focus on affordable home expansion and resilient demand justify a high fair value, while others highlight risks like affordability pressures and say the fair value should be much lower. Narratives let you see and compare both viewpoints, guiding smarter, more confident investing.

Do you think there's more to the story for D.R. Horton? Create your own Narrative to let the Community know!

NYSE:DHI Community Fair Values as at Oct 2025

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.

Valuation is complex, but we're here to simplify it.

Discover if D.R. Horton might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.

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