D. R. Horton
DHI
$146.53
+2.47%
D.R. Horton is the largest homebuilder in the United States, operating in 126 markets across 36 states and generating over 90% of home sales revenue from single-family homes, supplemented by mortgage financing and title services through its financial services segment and a majority stake in lot developer Forestar Group. Its competitive identity is built on scale and affordability leadership — a high-volume, entry-level-focused model that emphasizes inventory turnover and pace over margin maximization, distinguishing it from move-up and luxury peers. The current investor narrative is dominated by a housing affordability crisis: mortgage rates above 7%, driven by surging Treasury yields, have compressed buyer purchasing power and pushed the stock down roughly 7% over the past year even as revenue has flattened. The debate now centers on whether a rate-driven volume trough is near, with Berkshire Hathaway's aggressive expansion into housing (the $6.8 billion Taylor Morrison acquisition and a growing Lennar stake) cited by bulls as evidence of deep value, while bears point to persistent margin compression and a decelerating order backdrop.…
DHI
D. R. Horton
$146.53
Related headlines
DHI 12-Month Price Forecast
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 $152.36 and implied upside of +4.0% versus the current price.
Average Target
$152.36
0 analysts
Implied Upside
+4.0%
vs. current price
Analyst Count
—
covering this stock
Price Range
$119 - $206
Analyst target range
Coverage is solid with 14 analysts, but sentiment is decidedly neutral: the consensus recommendation is "hold" with a mean rating of 2.76 (where 1 is strong buy and 5 is strong sell), and the average target price of $152.36 implies just +3.3% upside from the current $147.48. That thin upside, combined with the hold consensus, signals that the Street sees the stock as fairly valued after its recent bounce and is waiting for either rate relief or a clearer order trend before turning constructive. The consensus leans neutral-to-cautious rather than bullish, consistent with the flat revenue and compressing margins in the fundamentals.\n\nThe target range is wide — $119.00 low to $206.00 high, a spread of 73% around the average — which signals genuine disagreement about the housing cycle's path. The $206 high target implies roughly 40% upside and would require multiple expansion plus a rate-driven volume recovery and margin stabilization; the $119 low implies about 19% downside and prices in persistent affordability pressure, further margin compression, and a prolonged volume trough. Recent institutional actions show a mild positive tilt: Zelman & Assoc upgraded to Outperform from Neutral on July 7, 2026, while RBC Capital maintained Underperform and Wells Fargo, Truist, Keefe Bruyette, and Evercore all reiterated neutral stances through September — a pattern of stable-to-slightly-improving sentiment with no fresh downgrades. The wide dispersion and hold consensus mean the stock is likely to trade on macro rate data rather than analyst revisions in the near term.
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Bulls vs Bears: DHI Investment Factors
The bear case currently has stronger near-term evidence: revenue growth of 0.02% is effectively zero, gross margin has compressed from 25.5%+ in fiscal 2024 to 23.26%, and the analyst consensus is a hold with only 3.3% upside to the $152.36 average target. The bull case rests on valuation and balance-sheet quality — 13.16x forward earnings, 0.249 debt-to-equity, a ~6.3% FCF yield, and Berkshire's aggressive housing bets — which provide a floor but not a catalyst. The single most important tension is the mortgage rate path: at 7%+ rates, volume stays flat and margins keep eroding, but any sustained move toward 6% would simultaneously revive orders, relieve incentive pressure, and likely trigger multiple expansion from a depressed base. Until that resolution, DHI is a fairly valued, range-bound cyclical whose 42% position in its 52-week band and $130.40 floor define the risk-reward.
Bullish
- Deep value on forward earnings: At $147.48, DHI trades at 13.16x forward EPS of $20.18 versus 14.58x trailing, and just 1.53x sales and 2.16x book against a 14.8% ROE. For the largest U.S. homebuilder with a 23.7% gross margin, that multiple embeds substantial cyclical pessimism and offers a margin of safety if mortgage rates ease.
- Fortress balance sheet and cash generation: Debt-to-equity of just 0.249 and a current ratio of 17.39 reflect conservative financing, while trailing free cash flow of $3.31 billion against a $52.3 billion market cap implies roughly a 6.3% FCF yield. Q3 2026 FCF rebounded to +$503.9 million after a working-capital-driven -$449.7 million in Q2, funding $610.4 million of buybacks and $127.1 million of dividends in the quarter alone.
- Berkshire validation of housing value: Berkshire Hathaway's $6.8 billion Taylor Morrison acquisition, an 11% Lennar stake, and $212 million of Lennar buying in three days signal that sophisticated long-term capital sees deep value in beaten-down homebuilders. This institutional endorsement supports the thesis that affordability-driven selling has overshot fundamental value.
- Short-term momentum inflecting: The stock is up 5.22% over the past month versus a -1.02% S&P 500, producing relative strength of +6.24, and has rallied roughly 10.7% from $133.23 on October 5 to $147.48. This positive divergence against a still-negative 12-month relative strength of -20.11 hints at a mean-reversion turn.
Bearish
- Revenue has flatlined year over year: Fiscal Q3 2026 revenue of $9.227 billion grew just 0.02% versus $9.226 billion a year earlier, a stark deceleration from quarterly revenue above $10 billion in Q4 2024. With homebuilding at $8.686 billion of the total, the core engine is stalled and any recovery must come from rate relief rather than company-specific growth.
- Gross margin in stair-step decline: Gross margin fell to 23.26% in Q3 2026 from 23.95% a year earlier and well below the 25.5%+ levels of fiscal 2024, with the multi-quarter path (25.09% → 24.57% → 23.95% → 21.67% → 23.16% → 22.54% → 23.26%) showing persistent compression. EBITDA margin of 13.60% versus 14.99% and net margin of 9.81% versus 11.11% confirm the squeeze is flowing through the P&L.
- Mortgage rates above 7% cap demand: Surging Treasury yields have pushed mortgage rates above 7%, directly compressing buyer purchasing power and capping volume, as evidenced by the flat top line and elevated incentives needed to move inventory. This is an external constraint DHI cannot fix through execution, making the stock hostage to macro rate data.
- Consensus hold with minimal upside: The 14-analyst consensus is 'hold' with a mean rating of 2.76 and an average target of $152.36 implying just +3.3% upside from $147.48. RBC Capital maintains Underperform, and Wells Fargo, Truist, Keefe Bruyette, and Evercore all reiterated neutral stances through September — the Street sees the stock as fairly valued after its bounce.
DHI Technical Analysis
D.R. Horton is in a range-bound consolidation with a modestly negative longer-term tilt, having fallen 6.98% over the past year versus a 13.13% gain for the S&P 500 — a relative underperformance of 20.11 percentage points. At $147.48, the stock sits at roughly 42% of its 52-week range of $130.40 to $170.79, meaning it is in the lower-middle half of the band — neither a momentum leader nor a deep-value falling knife, but a stock that has repeatedly failed to hold rallies toward the high end. The 24.25% max drawdown underscores that this is a range-trader's stock rather than a trend-follower's, with the $130-135 zone acting as the floor of the current regime.\n\nShort-term momentum has turned constructive and is diverging positively from the weak 1-year trend: the stock is up 5.22% over the past month and 0.49% over three months, while the S&P 500 fell 1.02% and rose 2.85% over the same periods, producing a relative strength of +6.24 over one month. That one-month outperformance is notable because it comes against a still-negative 12-month relative strength of -20.11, suggesting a potential mean-reversion bounce rather than a confirmed trend reversal. The recent surge from $133.23 on October 5 to $147.48 on October 23 — a roughly 10.7% move in under three weeks — is a sharp acceleration that leaves the stock short-term extended and vulnerable to profit-taking; volume of 2.66 million shares is unremarkable, offering no confirmation of institutional accumulation.\n\nKey technical levels are well defined: support sits at the 52-week low of $130.40, with secondary support around the $133-135 area that held in early October, while resistance is the 52-week high of $170.79, with intermediate resistance near $155-160 where the stock stalled in June and July. A breakout above $170.79 would signal a genuine regime change and likely require a catalyst such as falling mortgage rates, whereas a breakdown below $130.40 would confirm the downtrend and open deeper downside. With a beta of 1.351, the stock is roughly 35% more volatile than the market, meaning position sizing should be scaled down accordingly — a 10% market move implies roughly a 13.5% move here, and the 24.25% max drawdown illustrates the real capital risk in this name.
Beta
1.35
1.35x market volatility
Max Drawdown
-24.3%
Largest decline past year
52-Week Range
$130-$171
Price range past year
Annual Return
-1.2%
Cumulative gain past year
| Period | DHI Return | S&P 500 |
|---|---|---|
| 1m | +5.1% | +0.7% |
| 3m | +2.4% | +3.0% |
| 6m | -2.3% | +6.8% |
| 1y | -1.2% | +11.9% |
| ytd | +0.6% | +12.8% |
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DHI Fundamental Analysis
Revenue has essentially flatlined: fiscal Q3 2026 (quarter ended June 30, 2026) revenue of $9.227 billion grew just 0.02% year over year versus $9.226 billion in Q3 2025, a stark deceleration from the prior-year period when quarterly revenue was still running above $10 billion in Q4 2024. The sequential trend is more encouraging — revenue rose from $6.887 billion in Q1 2026 to $7.558 billion in Q2 to $9.227 billion in Q3, reflecting normal seasonal build — but the year-over-year stall confirms that affordability constraints are capping volume growth. Segment data shows homebuilding at $8.686 billion of the total, with Forestar at $407 million, rental at $266 million, and financial services at $221 million, meaning the core homebuilding engine is the sole driver and any recovery must come from there. The flat top line implies the investment case is now about margin stabilization and rate relief rather than growth.\n\nProfitability remains solid but is clearly compressing: Q3 2026 net income was $904.9 million on a 9.81% net margin, down from $1.025 billion and an 11.11% net margin in Q3 2025, while gross margin fell to 23.26% from 23.95% a year earlier and well below the 25.5%+ levels seen in fiscal 2024. The multi-quarter gross margin trajectory — 25.09% in Q1 2025, 24.57% in Q2 2025, 23.95% in Q3 2025, 21.67% in Q4 2025, 23.16% in Q1 2026, 22.54% in Q2 2026, 23.26% in Q3 2026 — shows a stair-step decline with only modest sequential recovery, consistent with elevated incentives and price concessions needed to move inventory. Operating margin of 13.29% in Q3 2026 versus 13.71% a year ago and EBITDA margin of 13.60% versus 14.99% confirm the squeeze is flowing through the P&L. For a volume homebuilder, gross margins in the low-20s are acceptable but leave little cushion if incentives escalate further.\n\nThe balance sheet is a genuine strength: debt-to-equity of just 0.249 and a current ratio of 17.39 reflect a conservatively financed, highly liquid operator, and trailing free cash flow of $3.31 billion against a $52.3 billion market cap implies an FCF yield of roughly 6.3%. However, cash generation is lumpy — Q2 2026 FCF was -$449.7 million due to a $1.199 billion working capital build, while Q3 rebounded to +$503.9 million — and the company is returning substantial capital, with $610.4 million of buybacks and $127.1 million of dividends in Q3 alone. ROE of 14.82% and ROA of 6.88% are respectable but down from prior-year levels, and with inventory turnover at just 0.27x and days of inventory outstanding near 339, capital is tied up in land and homes. The company funds growth internally and has ample liquidity, but the low inventory turns mean cash flow will remain cyclical with the housing cycle.
Quarterly Revenue
$9.2B
2026-06
Revenue YoY Growth
+0.0%
YoY Comparison
Gross Margin
23.3%
Latest Quarter
Free Cash Flow
$3.3B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is DHI Overvalued?
Because D.R. Horton is solidly profitable — Q3 2026 net income of $904.9 million and trailing EPS positive — the PE ratio is the appropriate primary metric. The stock trades at 14.58x trailing earnings but only 13.16x forward earnings, a roughly 10% discount that implies the market expects modest earnings growth despite the flat revenue backdrop; the forward estimate of $20.18 in average EPS versus a trailing figure near $10.12 (implied by the 14.58x multiple on the $147.48 price) suggests the trailing PE may be distorted by a partial-year or adjusted EPS basis, so the forward multiple is the more reliable anchor. A 13x forward PE for the largest homebuilder in the U.S. is undemanding in absolute terms and reflects the market's skepticism about the durability of current earnings.\n\nRelative to the residential construction sector, DHI's 14.58x trailing PE and 1.53x PS ratio sit at a discount to what premium homebuilders typically command, and its 2.16x price-to-book is modest for a company with 14.8% ROE. The 11.43x EV/EBITDA and 1.41x EV/Sales are low for a business with a 23.7% gross margin and 10.5% net margin, suggesting the market is pricing in cyclical risk rather than paying for quality. The PEG ratio of -0.75 is not meaningful given the negative earnings growth implied, which itself signals the market's concern about earnings direction. On balance, the discount appears justified by the flat revenue trajectory and margin compression, but it also embeds a meaningful margin of safety if rates ease.\n\nHistorically, DHI's PE has ranged from roughly 3.5x in late 2022 (a cyclical trough) to 17.7x in Q1 2026, with the current 14.58x sitting in the upper-middle of that band — closer to the high end than the low. Its price-to-book of 2.16x compares with a historical range from about 1.2x (2022) to 2.45x (Q4 2024), placing it mid-range, while the PS ratio of 1.53x is near the low end of its multi-year band of roughly 1.5x-6.6x. The mixed picture — elevated PE but depressed PS — reflects compressed margins on a flat revenue base: the market is paying a normal multiple on temporarily depressed earnings, which is either a value opportunity or a warning depending on the rate outlook.
PE
13.5x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 4x~18x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
10.3x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks center on margin durability and capital intensity. Gross margin has fallen from 25.5%+ in fiscal 2024 to 23.26% in Q3 2026, with EBITDA margin down to 13.60% from 14.99%, meaning each incremental incentive dollar hits earnings disproportionately; net income fell to $904.9 million from $1.025 billion year over year on essentially flat revenue. Inventory turnover of just 0.27x and days of inventory outstanding near 339 tie up capital in land and homes, and free cash flow is lumpy — Q2 2026 was -$449.7 million on a $1.199 billion working capital build before rebounding to +$503.9 million in Q3. The offsetting strength is a 0.249 debt-to-equity ratio and 17.39 current ratio, so solvency is not the risk; earnings compression is.
Market and competitive risks are dominated by valuation sensitivity to rates and sector rotation. With a beta of 1.351, DHI amplifies market moves by roughly 35%, and its 20.11 percentage point 12-month underperformance versus the S&P 500 shows how quickly housing stocks de-rate when yields rise. Mortgage rates above 7%, driven by surging Treasury yields, are the primary external threat and have already produced a 24.25% max drawdown; recent coverage explicitly frames rising yields as 'killing this group of stocks.' Berkshire's $6.8 billion Taylor Morrison deal and Lennar stake validate the sector's value but also signal that larger, better-capitalized competitors are consolidating, while DHI's entry-level focus leaves it most exposed to affordability-driven demand destruction.
The worst-case scenario is a prolonged period of 7%+ mortgage rates that forces further incentive escalation, pushes gross margin toward the 21.67% Q4 2025 trough or below, and triggers estimate cuts that compress the forward multiple. In that chain, the stock would retest its 52-week low of $130.40 — about -11.6% from $147.48 — and a break below that level, as the technical picture warns, would open deeper downside toward the $119 analyst low, roughly -19.3%. A severe housing downturn combined with multiple compression toward the 2022-era 3.5x PE trough would be far more damaging, but the realistic 12-month downside is the -11.6% to -19.3% range anchored by the 52-week low and analyst bear target.