TAYLOR MORRISON HOME CORP (NYSE:TMHC) – A Strong Candidate for GARP Investors

TAYLOR MORRISON HOME CORP (NYSE:TMHC) stands out as a compelling pick for investors seeking long-term growth at a reasonable price (GARP). The homebuilder meets key criteria from Peter Lynch’s investment strategy, balancing solid growth, profitability, and an attractive valuation. Below, we examine why TMHC fits this approach.

Growth and Valuation

• EPS Growth: TMHC has delivered strong earnings growth, with a 5-year average EPS increase of 23.4%, comfortably within Lynch’s preferred range of 15-30%.
• PEG Ratio: At 0.33, the PEG ratio (which adjusts the P/E for growth) is well below 1, signaling the stock is undervalued relative to its growth prospects.
• P/E Ratio: With a trailing P/E of 7.67, TMHC trades at a significant discount to both its industry peers and the broader S&P 500.

Financial Health and Profitability

• Debt/Equity: The company maintains a conservative balance sheet, with a debt-to-equity ratio of 0.35, below Lynch’s preferred threshold of 0.6.
• Current Ratio: At 5.98, TMHC has ample liquidity to cover short-term obligations.
• ROE: A return on equity of 15.2% reflects efficient use of shareholder capital, exceeding Lynch’s 15% minimum.

Fundamental Strengths

Our fundamental analysis highlights TMHC’s strengths:

• Profitability: The company scores highly on margins, with operating and profit margins outperforming most peers.
• Valuation: TMHC is priced cheaply across multiple metrics, including P/E, EV/EBITDA, and P/FCF.
• Growth Consistency: Revenue and earnings have grown steadily, though future growth expectations are more moderate.

For investors following a GARP strategy, TMHC offers a rare combination of growth, financial stability, and an attractive valuation.

Our Peter Lynch Strategy screener lists more stocks that fit this approach and is updated daily.

Disclaimer

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