Why NVR Shares Slid Off Their Foundation (NVR)

Why NVR Shares Slid Off Their Foundation

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of homebuilder NVR (NYSE: NVR ) dropped by as much as 13% this morning after the company reported disappointing second-quarter-earnings results.

So what: For the quarter, NVR reported an 11% increase in revenue to $769.8 million and a profit of $8.97 as new home orders rose 6%. However, Wall Street slammed the door in NVR's face as it had been looking for revenue of $829.8 million and certainly didn't expect cancellation rates to rise from 16.3% from the 12.5% reported in the year-ago period.

Now what: Today's report is interesting in that NVR had been the one homebuilder that had escaped the downturn in housing relatively unscathed. Now, it appears that roles are reversing. Lennar (NYSE: LEN ) , D.R. Horton (NYSE: DHI ) , and PulteGroup (NYSE: PHM ) all reported lower cancellation rates in their most recent quarters with only KB Home (NYSE: KBH ) joining NVR in the increasing cancellation rate column. In spite of its strong profitability, just as I highlighted in May, I feel NVR has been and still is rather pricey, and I would use today as a reminder that things aren't as peachy in the housing sector as many would like to believe.

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Report this Comment On July 20, 2012, at 9:58 AM, BurjisS wrote:

I have followed NVR for many years and find it one of the most intriguing stocks to own and a trader's delight or nightmare depends on which side of the fence you are. I have been both long and short this stock.
The low daily traded volume of this stock and the point spread makes it extremely volatile. This last run up in the past 7 months was not fathomable when the stock rose over 200 points. I finally did go short at 850 and then had a few restless weeks till yesterday when I covered it only to see it drop another 30 points later in the day!
It was interesting that the Motley Fool video forum was just touting this stock last week...... all I can say is that be extremely careful with this one and good luck and hang on to your hats when you trade NVR remembering the old addage "no pain ...no gain!

updated Moments ago Sponsored by:
	DOW	15,295.44	-11.73	-0.08%
	S&P 500	1,648.69	-6.66	-0.40%
	NASD	3,455.12	-8.18	-0.24%

NVR	$1002.52		+1.17	+0.12%
NVR, Inc.		CAPS Rating:

LEN	$42.91		+0.62	+1.47%
Lennar Corp		CAPS Rating:

PHM	$22.46		+0.03	+0.13%
PulteGroup, Inc.		CAPS Rating:

DHI	$26.21		+0.09	+0.34%
D.R. Horton, Inc.		CAPS Rating:

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Why NVR Shares Slid Off Their Foundation

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Report this Comment On July 20, 2012, at 9:58 AM, BurjisS wrote:

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