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Don't Ignore the Relative Strength of These 3 Homebuilders

Investors who target stocks displaying relative strength often find themselves in favorable trends, no matter the direction of the general market.

For a quick explanation, relative strength focuses on stocks or other assets that have performed well relative to the market as a whole or a relevant benchmark.

And in 2023, several homebuilders, including NVR NVR, Lennar LEN, and D.R. Horton DHI, have all displayed relative strength, handily outperforming the general market. This is illustrated in the chart below.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

For those interested in tapping into the recent momentum, let’s take a closer look at each.

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NVR

NVR is engaged in constructing and selling single-family detached homes, townhomes, and condominium buildings. Analysts have increased their earnings expectations across nearly all timeframes, helping land the stock into a favorable Zacks Rank #2 (Buy).

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

NVR shares aren’t stretched regarding valuation, with the current 13.3X forward earnings multiple sitting well beneath the 15.1X five-year median and the Zacks Construction sector average.

The stock carries a Style Score of “B.”

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

D.R. Horton

D.R. Horton is a leading national homebuilder primarily engaged in the construction and sale of single-family houses both in the entry-level and move-up markets. The stock boasts the highly-coveted Zacks Rank #1 (Strong Buy).

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

The company posted a blowout quarter in its latest release, penciling in a 44% EPS beat. Quarterly revenue totaled $7.9 billion, 20% ahead of expectations and essentially flat from the year-ago period.

Impressively, the results reflected the company’s second consecutive quarter of posting a double-digit percentage EPS surprise.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Lennar

Like the stocks above, analysts have recently become bullish on Lennar’s earnings outlook, with estimates increasing across all timeframes over the last 60 days. The stock is a Zacks Rank #2 (Buy).

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

For those with an appetite for income, LEN shares have that covered; the company’s annual dividend presently yields 1.4% with a sustainable payout ratio at 9% of earnings.

Undoubtedly a major highlight, LEN is committed to increasingly rewarding its shareholders, boasting a rock-solid 85% five-year annualized dividend growth rate.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Bottom Line

Targeting stocks displaying relative strength is an excellent way for investors to insert themselves in favorable market trends.

And in 2023, several homebuilders, including NVR NVR, Lennar LEN, and D.R. Horton DHI, have all reflected relative strength, outperforming the general market handily.

In addition, all three sport a favorable Zacks Rank, indicating near-term optimism from analysts.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Lennar Corporation (LEN) : Free Stock Analysis Report

D.R. Horton, Inc. (DHI) : Free Stock Analysis Report

NVR, Inc. (NVR) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research