D. R. Horton
DHI
$144.79
-3.08%
D.R. Horton is the largest homebuilder in the United States, operating in 126 markets across 36 states, primarily constructing single-family homes for entry-level, move-up, luxury, and active adult buyers, while also offering mortgage financing and title services through its financial services segment. As the market leader by volume, the company benefits from economies of scale and a diversified geographic footprint, with a majority ownership stake in Forestar Group for lot development. The current investor narrative centers on the impact of rising mortgage rates and geopolitical tensions on housing demand, with recent news highlighting a potential housing rebound and the stock's sensitivity to interest rate movements, driving debate around cyclical headwinds versus long-term structural demand.…
DHI
D. R. Horton
$144.79
Related headlines
Investment Opinion: Should I buy DHI Today?
Rating: Hold. D.R. Horton is a well-capitalized market leader facing cyclical headwinds, making it a hold for existing investors and a cautious entry point for new ones. The consensus analyst rating is Hold with an average target of $168.00, implying 12.5% upside, but the recent revenue decline and margin compression warrant caution.
Supporting Evidence: The trailing P/E of 14.58x is a 19% discount to the industry average of ~18x, and the forward P/E of 12.45x suggests expected earnings growth. Revenue growth has turned negative (-2.27% YoY), but the company maintains a strong gross margin of 22.54% and a net margin of 8.57%. Free cash flow TTM is $3.5 billion, and the company is aggressively buying back shares ($975M in Q2). The ROE of 14.82% is robust, and the balance sheet is strong with a debt-to-equity ratio of 0.25.
Risks & Conditions: The biggest risks are further margin compression and revenue decline if mortgage rates stay high. This Hold would upgrade to Buy if the forward P/E compresses below 10x or if revenue growth turns positive again. It would downgrade to Sell if gross margins fall below 20% or if the company reports negative free cash flow for two consecutive quarters. Overall, DHI appears fairly valued relative to its cyclical risks, trading at a discount to peers but with justified caution given the current housing market headwinds.
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DHI 12-Month Price Forecast
D.R. Horton is a high-quality homebuilder facing cyclical headwinds. The valuation is attractive relative to history and peers, but the fundamental trends are deteriorating with negative revenue growth and margin compression. The stock's high beta makes it a leveraged play on interest rates, and the near-term outlook hinges on mortgage rate direction. The base case of a stable but weak housing market seems most likely, with the stock trading in a range. An upgrade to bullish would require clear signs of a housing rebound, while a downgrade to bearish would follow further deterioration in financials or a spike in rates.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on D. R. Horton's 12-month outlook, with a consensus price target around $168.00 and implied upside of +16.0% versus the current price.
Average Target
$168.00
0 analysts
Implied Upside
+16.0%
vs. current price
Analyst Count
—
covering this stock
Price Range
$123 - $206
Analyst target range
The stock is covered by 13 analysts, with a consensus recommendation of 'Hold' (mean recommendation of 2.53 on a 1-5 scale, where 1 is Strong Buy and 5 is Strong Sell). The average target price is $168.00, implying approximately +12.5% upside from the current price of $149.39. The distribution includes 2 Buy ratings, 8 Hold/Equal Weight, and 3 Underperform/Sell, indicating a cautious but not overly bearish sentiment.
The target price range spans from a low of $123.00 to a high of $206.00, representing a wide spread of $83, which signals high uncertainty about the company's future performance. The low target of $123.00 assumes continued margin compression and potential revenue declines due to a prolonged housing downturn, while the high target of $206.00 reflects optimism about a housing rebound, margin expansion, and multiple expansion. Recent analyst actions show mostly reiterations, with Zelman & Assoc upgrading from Neutral to Outperform on July 7, 2026, suggesting some positive momentum, but the overall consensus remains cautious.
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Bulls vs Bears: DHI Investment Factors
D.R. Horton presents a classic cyclical value debate. On the bull side, the company boasts a fortress balance sheet (debt-to-equity 0.25), a valuation discount to peers (trailing P/E 14.58x vs. industry ~18x), aggressive share buybacks ($975M in Q2), and 12.5% upside to the average analyst target. On the bear side, revenue has turned negative (-2.27% YoY), margins are compressing (gross margin down 203 bps YoY), and the stock is highly sensitive to rising mortgage rates (beta 1.361). The single most important tension is whether the housing market will rebound as interest rates potentially stabilize or fall, or if elevated rates will continue to suppress demand. Currently, the bearish evidence from recent financial trends is stronger, but the valuation and balance sheet provide a floor, making the stock a cautious Hold with a watchful eye on rate developments.
Bullish
- Market Leader with Strong Balance Sheet: D.R. Horton is the largest U.S. homebuilder with a debt-to-equity ratio of only 0.25 and a current ratio of 17.39, indicating exceptional financial strength. This low leverage provides a cushion against cyclical downturns and allows continued investment in land and share buybacks.
- Attractive Valuation vs. Peers and History: The trailing P/E of 14.58x is a 19% discount to the industry average of ~18x, and the forward P/E of 12.45x implies expected earnings growth. Historically, the stock trades near the lower end of its 5-year P/E range (4x-18x), suggesting potential value if fundamentals stabilize.
- Significant Share Buyback Program: In Q2 2026 alone, DHI repurchased $975.3 million of its own stock, signaling management confidence. With a market cap of $52.3 billion, this aggressive buyback can support EPS growth even if net income remains flat.
- Analyst Target Implies 12.5% Upside: The average analyst price target of $168.00 represents a 12.5% upside from the current price of $149.39. While the consensus is Hold, the high target of $206.00 suggests significant upside potential if housing demand rebounds.
Bearish
- Revenue Growth Turning Negative: Q2 2026 revenue of $7,558 million declined 2.27% year-over-year, a sharp deceleration from the 7.4% growth in Q3 2025. This contraction reflects higher mortgage rates and geopolitical uncertainty dampening housing demand.
- Margins Under Pressure: Gross margin fell from 24.57% in Q2 2025 to 22.54% in Q2 2026, and operating margin dropped from 12.95% to 10.58% over the same period. This compression indicates higher costs and pricing pressures that could further erode profitability.
- High Sensitivity to Interest Rates: With a beta of 1.361, DHI is 36% more volatile than the S&P 500, making it highly sensitive to interest rate moves. Recent news highlights mortgage rates hitting four-week highs due to geopolitical tensions, which could further pressure housing demand.
- Cautious Analyst Consensus: The mean analyst recommendation is 2.53 (Hold), with only 2 Buy ratings, 8 Hold, and 3 Underperform/Sell. The wide target range ($123-$206) reflects high uncertainty about the company's near-term prospects.
DHI Technical Analysis
D.R. Horton's stock is in a range-bound consolidation pattern after a significant rally, with the 1-year price change of +13.48% indicating a sustained uptrend over the longer term. However, the current price of $149.39 sits at approximately 30% of its 52-week range ($129.22 - $184.55), suggesting the stock is closer to the lower end of its yearly range, which could imply a value opportunity if fundamentals support a recovery, or a falling knife if headwinds persist. The 52-week low of $129.22 provides a key support level, while the high of $184.55 represents resistance, with the stock currently 19% below that peak.
Short-term momentum is weak, with the 1-month price change of -2.03% and 3-month change of -0.28% both negative, contrasting with the positive 1-year trend. This divergence signals a potential short-term pullback or consolidation within the longer-term uptrend, as the stock has lost momentum in recent months. The relative strength versus the S&P 500 is negative across all periods, with a 1-month relative strength of -2.34% and 3-month of -4.95%, indicating the stock is underperforming the broader market, which could be a warning sign for near-term direction.
Key support is at the 52-week low of $129.22, and a breakdown below this level would signal a bearish reversal and potential further downside. Resistance is at the 52-week high of $184.55, and a breakout above this level would indicate renewed bullish momentum and a resumption of the uptrend. With a beta of 1.361, the stock is 36% more volatile than the S&P 500, meaning it tends to amplify market moves, which is important for risk management and position sizing.
Beta
1.36
1.36x market volatility
Max Drawdown
-28.0%
Largest decline past year
52-Week Range
$129-$185
Price range past year
Annual Return
+9.9%
Cumulative gain past year
| Period | DHI Return | S&P 500 |
|---|---|---|
| 1m | -8.3% | -0.6% |
| 3m | -10.7% | +5.4% |
| 6m | -8.4% | +8.3% |
| 1y | +9.9% | +18.3% |
| ytd | -0.6% | +8.8% |
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DHI Fundamental Analysis
Revenue trajectory shows deceleration, with the most recent quarterly revenue of $7,558 million in Q2 2026 declining 2.27% year-over-year, compared to prior quarters that had positive growth (e.g., Q3 2025 revenue of $9,226 million grew 7.4% YoY). The multi-quarter trend indicates a slowdown from mid-single-digit growth to a slight contraction, driven by higher mortgage rates and geopolitical uncertainty dampening housing demand. Segment data reveals that Homebuilding revenue of $7,063 million remains the core driver, while Financial Services contributed $193 million and Forestar Group $374 million, but the overall decline suggests cyclical pressure on the primary business.
Profitability remains solid, with net income of $647.9 million in Q2 2026 and a gross margin of 22.54%, though this is compressed from 24.57% in Q2 2025 and 26.51% in Q3 2024. Operating margin of 10.58% is down from 12.95% a year ago, indicating margin compression due to higher costs and pricing pressures. The company is profitable with a net margin of 8.57%, but the trend is declining, which could be a concern if the housing market weakens further.
Balance sheet is healthy with a debt-to-equity ratio of 0.25, indicating low leverage, and a current ratio of 17.39, reflecting strong liquidity. Free cash flow (TTM) is $3,497.5 million, but the most recent quarter showed negative free cash flow of -$449.7 million due to working capital changes, though the company generated $826.6 million in Q1 2026. ROE of 14.82% is robust, and the company has ample cash to fund operations and share buybacks, with $975.3 million in stock repurchases in Q2 2026, signaling management confidence.
Quarterly Revenue
$7.6B
2026-03
Revenue YoY Growth
-2.3%
YoY Comparison
Gross Margin
22.5%
Latest Quarter
Free Cash Flow
$3.5B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is DHI Overvalued?
Since net income is positive, the primary valuation metric is the P/E ratio. The trailing P/E is 14.58x, while the forward P/E is 12.45x, indicating that the market expects earnings growth over the next year. The gap between trailing and forward P/E suggests a positive growth outlook, as the forward multiple is lower, implying higher expected earnings.
Compared to the industry average (Residential Construction), the stock's trailing P/E of 14.58x is at a discount to the sector average of approximately 18x (based on historical data), representing a 19% discount. This discount may be justified by the company's decelerating revenue growth and margin compression, but the market leader status and strong balance sheet could warrant a premium. The P/B ratio of 2.16x is also below the industry average of around 2.5x, further supporting a value-oriented valuation.
Historically, the current trailing P/E of 14.58x is near the lower end of its 5-year range, which has fluctuated between roughly 4x and 18x. This suggests the stock is trading at a discount to its historical average, which could indicate a value opportunity if the company can stabilize growth and margins. However, the low multiple also reflects the market's concerns about cyclical headwinds and potential earnings deterioration.
PE
14.6x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 4x~18x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
11.4x
Enterprise Value Multiple
Investment Risk Disclosure
Financial & Operational Risks: DHI's revenue decline of 2.27% YoY in Q2 2026 and margin compression (gross margin down from 24.57% to 22.54%) are key financial risks. While the debt-to-equity ratio is low at 0.25, the company's free cash flow turned negative in Q2 2026 (-$449.7 million) due to working capital changes, though TTM FCF remains strong at $3.5 billion. Continued margin erosion could lead to earnings disappointment, especially if revenue growth does not recover. The company's heavy reliance on homebuilding (over 90% of revenue) makes it vulnerable to a prolonged housing downturn.
Market & Competitive Risks: The stock's beta of 1.361 indicates high sensitivity to interest rate movements, and recent news of mortgage rates hitting four-week highs due to geopolitical tensions poses a direct headwind. The stock is trading at a discount to the industry average P/E, but this could compress further if earnings deteriorate. Competitive risks include smaller builders offering incentives and the potential for increased supply from existing home inventory. The wide analyst target range ($123-$206) underscores high uncertainty, and the consensus Hold rating suggests limited near-term catalysts.
Worst-Case Scenario: If mortgage rates remain elevated or rise further due to persistent inflation or geopolitical shocks, housing demand could weaken significantly, leading to further revenue declines and margin compression. In this scenario, earnings could fall below the low estimate of $11.60 per share, and the stock could drop to the 52-week low of $129.22 or the analyst low target of $123.00. From the current price of $149.39, this represents a potential downside of 13.5% to 17.7%. The historical max drawdown of -27.99% suggests even deeper losses are possible in a severe downturn.
FAQ
The primary risk is sensitivity to interest rates (beta 1.361), as rising mortgage rates directly reduce housing affordability and demand. Financial risks include declining revenue (-2.27% YoY) and compressing margins (gross margin down 203 bps YoY). Competitive risks from other builders and existing home inventory could pressure pricing. Company-specific risks include a potential slowdown in land development or execution issues. The most severe risk is a prolonged housing downturn that could push the stock to the low analyst target of $123.00, a 17.7% downside from current levels.
The 12-month forecast is mixed, with a base case probability of 50% for a price range of $140-$168, assuming stable but weak housing demand. The bull case (25% probability) targets $168-$206, driven by Fed rate cuts and a housing rebound. The bear case (25% probability) targets $123-$140, if mortgage rates rise further. The average analyst target is $168.00, implying 12.5% upside. The most likely scenario is the base case, where the stock trades in a range as the market waits for clarity on interest rates and housing demand.
DHI appears undervalued relative to its industry and historical norms. The trailing P/E of 14.58x is a 19% discount to the residential construction industry average of ~18x, and the forward P/E of 12.45x implies expected earnings growth. The P/B ratio of 2.16x is also below the industry average of ~2.5x. Historically, the stock's 5-year P/E range is 4x-18x, and the current level is near the lower end, suggesting value. However, the discount is justified by the cyclical headwinds of rising mortgage rates and declining revenue. The market is pricing in cautious expectations, but if the housing market stabilizes, the stock could re-rate higher.
DHI is a cautious buy for investors with a long-term horizon and tolerance for cyclical volatility. The stock offers a 12.5% upside to the average analyst target of $168.00 and trades at a 19% discount to the industry average P/E. However, near-term headwinds include declining revenue (-2.27% YoY) and margin compression. It is best suited for those who believe mortgage rates will decline, as the stock's high beta (1.361) amplifies sensitivity to rates. For short-term traders, the wide target range ($123-$206) and recent price volatility present opportunities but also significant risk.
DHI is better suited for long-term investment (3-5 years) due to its cyclical nature and high volatility (beta 1.361). Short-term traders may find opportunities in the wide price swings, but the stock's sensitivity to unpredictable macro events (e.g., geopolitical tensions) adds risk. The company's strong balance sheet and market leadership provide a foundation for long-term recovery, but near-term headwinds from rising mortgage rates suggest patience is required. A minimum holding period of 12-18 months is recommended to allow for potential rate cuts and a housing market rebound.
