At US$37.14, Is Tri Pointe Homes, Inc. (NYSE:TPH) Worth Looking At Closely?

Tri Pointe Homes, Inc. (NYSE:TPH), is not the largest company out there, but it led the NYSE gainers with a relatively large price hike in the past couple of weeks. The recent rally in share prices has nudged the company in the right direction, though it still falls short of its yearly peak. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today we will analyse the most recent data on Tri Pointe Homes’s outlook and valuation to see if the opportunity still exists.

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What Is Tri Pointe Homes Worth?

According to our valuation model, Tri Pointe Homes seems to be fairly priced at around 18% below our intrinsic value, which means if you buy Tri Pointe Homes today, you’d be paying a reasonable price for it. And if you believe the company’s true value is $45.40, then there’s not much of an upside to gain from mispricing. Although, there may be an opportunity to buy in the future. This is because Tri Pointe Homes’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Check out our latest analysis for Tri Pointe Homes

What kind of growth will Tri Pointe Homes generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Tri Pointe Homes, at least in the near future.

What This Means For You

Are you a shareholder? Currently, TPH appears to be trading around its fair value, 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 beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on TPH for a while, now may not be the most optimal time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which 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 gel your views on TPH should the price fluctuate below its true value.

In light of this, if you'd like to do more analysis on the company, it's vital to be informed of the risks involved. For example - Tri Pointe Homes has 1 warning sign we think you should be aware of.

If you are no longer interested in Tri Pointe Homes, 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.