- MHO DHI
Quick Read
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M/I Homes delivered a record 2,296 homes but missed earnings by 10% as gross margins compressed from 26.8% to 23.9%.
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M/I Homes trades at 8x earnings versus D.R. Horton’s 14x despite delivering 219% five-year returns compared to D.R. Horton’s 153%.
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M/I Homes increased its credit facility from $650M to $900M and grew shareholders’ equity to a record $3.1B.
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Investors rethink ‘hands off’ investing and decide to start making real money
M/I Homes (NYSE: MHO) and D.R. Horton (NYSE: DHI) both reported challenging third quarters that revealed how differently a nimble regional builder and the nation's largest homebuilder navigate the same storm. M/I Homes missed estimates by 10% with $3.92 EPS while delivering a record 2,296 homes. D.R. Horton saw earnings plunge 22% year-over-year despite its scale advantage.
Record Volume Can't Offset Margin Pressure at M/I Homes
M/I Homes CEO Robert Schottenstein called Q3 "solid" despite "continued challenging housing market conditions." The company delivered 2,296 homes, a quarterly record, yet revenue of $1.13 billion fell 1% year-over-year and missed the $1.17 billion consensus. Net income dropped 27% to $106.5 million as gross margins compressed from 26.8% to 23.9%. Construction costs and pricing pressure squeezed profitability even as operational execution remained strong.
New contracts fell 6% to 1,908, signaling softer demand ahead. M/I Homes operates primarily in Ohio, Texas, and Florida markets, giving it regional concentration that can work for or against it depending on local conditions.
D.R. Horton faced similar margin challenges across its national footprint. Operating margin held at 12.5%, nearly identical to M/I Homes' 11.7%, but the sheer scale of D.R. Horton's $34.25 billion in trailing revenue couldn't prevent the earnings decline. Both companies face the same problem: buyers hesitating as mortgage rates remain elevated and home prices stay high.
Valuation Gap Reveals Different Market Expectations
M/I Homes trades at 8x trailing earnings compared to D.R. Horton's 14x multiple. That 41% discount reflects investor skepticism about the smaller builder's ability to weather prolonged weakness. Yet M/I Homes' return on equity of 15.8% exceeds D.R. Horton's 14.3%, and its PEG ratio of 0.78 suggests the market may be overly pessimistic about growth prospects.
Metric
M/I Homes
D.R. Horton
P/E Ratio
8x
14x
Return on Equity
15.8%
14.3%
Operating Margin
11.7%
12.5%
Institutional Ownership
98.9%
Not specified
M/I Homes strengthened its balance sheet significantly, with shareholders' equity reaching a record $3.1 billion, up 11% year-over-year. Moody's upgraded the company's credit rating and M/I Homes extended its unsecured credit facility to 2030 with increased capacity from $650 million to $900 million.
Story ContinuesThe Five-Year Story Tells a Different Tale
Short-term performance favors D.R. Horton, which gained 15.5% over the past year versus M/I Homes' 8.3%. But over five years M/I Homes delivered 219% returns compared to D.R. Horton's 153%. Over ten years, M/I Homes gained 559% versus D.R. Horton's 488%. The smaller builder has consistently outpaced the industry giant over meaningful timeframes.
Key Considerations for Each Company
M/I Homes carries higher volatility with a 1.75 beta and trades at a significant valuation discount to D.R. Horton. The company has a strong long-term track record with superior five-year and ten-year returns, but faces near-term challenges with four consecutive quarters of earnings misses. The company's record shareholders' equity of $3.1 billion, upgraded credit rating, and expanded credit facility to $900 million demonstrate financial strength.
D.R. Horton offers lower volatility, a 1% dividend yield, and broader geographic diversification across national markets. The company trades at a premium valuation of 14x earnings compared to M/I Homes' 8x multiple. Both companies face similar margin pressure and operating challenges in the current housing market environment.
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