CCS - M/I Homes Is Not A Good Buy Now
2024-02-10 02:34:36 ET
Summary
- M/I Homes was one of my top performing picks in 2023, generating almost 120% alpha over the S&P500. But I think the alpha bull run has run its course:
- The homebuilding backlog is shrinking, which warns of a slowdown in future revenues.
- There are downside risks to both gross margins and EBIT margins due to material and labor cost pressures and higher opex cost intensity.
- Technical analysis also suggests that there is powerful resistance, halting progress of a continued alpha move in the stock vs the S&P500.
- However, M/I Homes trades at a 32% discount to its peer group median multiples, which is what keeps me from expressing a clear bearish view on the stock.