TAYLOR MORRISON HOME CORP (NYSE:TMHC) – A Homebuilder Worth Considering for GARP Investors

TAYLOR MORRISON HOME CORP (NYSE:TMHC) stands out as a potential candidate for investors seeking long-term growth at a reasonable price. The company, a residential homebuilder operating in 12 states, meets several key criteria from Peter Lynch’s investment strategy, including strong earnings growth, solid profitability, and an attractive valuation.

Why TMHC Fits the GARP Approach

• Strong Earnings Growth: TMHC has delivered an impressive 5-year average EPS growth of 23.4%, well above the 15% threshold Lynch prefers. This indicates a steady expansion in profitability.
• Reasonable Valuation: With a PEG ratio (5Y) of 0.31, the stock appears undervalued relative to its growth. A PEG below 1 suggests the market may not fully price in future earnings potential.
• Healthy Balance Sheet: The company maintains a conservative debt profile, with a Debt/Equity ratio of 0.35, below Lynch’s preferred threshold of 0.6. Additionally, its Current Ratio of 5.98 signals strong short-term liquidity.
• Profitability: TMHC’s Return on Equity (ROE) of 15.25% exceeds Lynch’s 15% benchmark, reflecting efficient use of shareholder capital.

Fundamental Strengths

Our fundamental analysis report highlights TMHC’s solid profitability and reasonable valuation. Key takeaways include:

• High Profit Margins: Operating margins of 15.01% outperform most industry peers.
• Cheap Valuation: A P/E of 7.37 is well below both the industry and S&P 500 averages.
• Positive Cash Flow: Consistent operating cash flow generation supports financial stability.

While growth is expected to moderate, TMHC’s disciplined financial management and market positioning make it a compelling option for investors focused on sustainable growth.

For more stocks that fit this strategy, explore our Peter Lynch Strategy screener, updated daily.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should always conduct your own research before making investment decisions.