DR HORTON INC (NYSE:DHI) – A Strong Contender for GARP Investors

DR HORTON INC (NYSE:DHI) stands out as a compelling candidate for investors seeking growth at a reasonable price (GARP). The company, one of the largest homebuilders in the U.S., meets key criteria from Peter Lynch’s investment strategy, balancing solid growth, profitability, and an attractive valuation.

Why DHI Fits the GARP Approach

• Strong Historical Growth: DHI has delivered an impressive 5-year average EPS growth of 27.63%, well above the minimum 15% threshold in Lynch’s strategy. While recent earnings have softened, the long-term trend remains robust.
• Reasonable Valuation: With a PEG ratio of 0.36 (based on past 5-year growth), the stock is priced attractively relative to its growth trajectory. The P/E ratio of 9.98 is also below both the industry and S&P 500 averages.
• Healthy Financials: The company maintains a conservative debt profile, with a Debt/Equity ratio of 0.26, aligning with Lynch’s preference for low leverage. Its Current Ratio of 5.12 indicates strong liquidity.
• Profitability: DHI’s Return on Equity (ROE) of 17.64% exceeds the 15% benchmark, reflecting efficient use of shareholder capital. Margins and returns on invested capital also rank favorably within the industry.

Fundamental Snapshot

DHI earns a fundamental rating of 7/10, with high marks for profitability and financial health. While near-term growth has slowed, the company’s long-term track record and disciplined capital allocation support its appeal for patient investors. For a deeper dive, review the full fundamental analysis here.

Our Peter Lynch Strategy screener lists more stocks that fit this disciplined approach.

Disclaimer

This is not investing advice. Always conduct your own research before making investment decisions.