What Is PulteGroup, Inc.'s (NYSE:PHM) Share Price Doing?

Today we're going to take a look at the well-established PulteGroup, Inc. (NYSE:PHM). The company's stock received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$122 at one point, and dropping to the lows of US$104. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether PulteGroup's current trading price of US$107 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at PulteGroup’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

Check out our latest analysis for PulteGroup

Is PulteGroup Still Cheap?

The share price seems sensible at the moment according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. We find that PulteGroup’s ratio of 8.27x is trading slightly below its industry peers’ ratio of 10.05x, which means if you buy PulteGroup today, you’d be paying a reasonable price for it. And if you believe PulteGroup should be trading in this range, then there isn’t much room for the share price to grow beyond the levels of other industry peers over the long-term. So, is there another chance to buy low in the future? Given that PulteGroup’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of PulteGroup look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -3.9% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for PulteGroup. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Currently, PHM appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to de-risk your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on PHM, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on PHM for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on PHM should the price fluctuate below the industry PE ratio.

If you'd like to know more about PulteGroup as a business, it's important to be aware of any risks it's facing. You'd be interested to know, that we found 1 warning sign for PulteGroup and you'll want to know about it.

If you are no longer interested in PulteGroup, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com