It's no secret that the real estate market is slow right now. Rising mortgage rates have kept many would-be homebuyers on the sidelines and have prompted many sellers to delay listing their homes. As a result, existing home inventory is at a generational low and has created a surprisingly good environment for homebuilders.
Although we already knew the new-home market was relatively strong, Dream Finders Homes(NYSE: DFH) reported third-quarter results that look even better than many investors expected, sending shares up by as much as 10% on Thursday morning.
Dream Finders is strong in a weak real estate market
Dream Finders reported 14% year-over-year growth in homebuilding revenue, fueled by 17% growth in home closings. And not only did sales grow impressively, but gross margins also increased by 200 basis points year over year to 20.6%.
Looking ahead, net new orders increased by 38% year over year to 1,535, and Dream Finders raised its full-year home closings guidance from 6,500 to 6,750. The company has a backlog of 5,025 sold homes, and with cancellation rates roughly half of last year's level, the company will likely close on the vast majority of them.
Is Dream Finders stock a buy?
To be sure, there's quite a bit that could go wrong still. If mortgage rates continue to rise, for example, it could cause even more buyers to remain on the sidelines. The same could be true if a recession hits the U.S.
That said, Dream Finders trades for just over 8 times trailing-12-month earnings per share despite tons of liquidity and strong momentum in its business. Although the real estate market could remain slow for some time, Dream Finders is firing on all cylinders and is worth a closer look.
10 stocks we like better than Dream Finders Homes
When our analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Dream Finders Homes wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of October 30, 2023
Matthew Frankel, CFP® has positions in Dream Finders Homes. The Motley Fool has positions in and recommends Dream Finders Homes. The Motley Fool has a disclosure policy.
