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Why Taylor Morrison Stock Just Jumped 9%

By Rich Smith – Oct 27, 2021 at 12:35PM

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Q3 earnings spiked 54% higher -- and this homebuilder isn't done growing yet.

What happened

Shares of Taylor Morrison Home (TMHC 1.89%) jumped 9.4% as of 11:20 a.m. EDT today, after the Scottsdale, Arizona-based homebuilder beat earnings expectations in its third-quarter report released this morning.

Expected by analysts to earn $1.20 per share on sales of $1.75 billion, Taylor Morrison reported instead a $1.34 per-share profit on sales of $1.86 billion.  

Workers in hard hats examine blueprints in front of a house under construction.

Image source: Getty Images.

So what

Taylor Morrison reported 3,327 sales in Q3 2021, and at prices 13% better per sale than it enjoyed a year ago, leading to 8% growth in revenue. The company also earned a "significantly better-than-anticipated" gross margin of 21.2%, helping it to grow bottom-line net profits 54% year over year.  

And this good news looks likely to get even better as the year rolls into its final quarter. Management booked 3,372 net new orders for houses in Q3, more than replacing its inventory of homes sold in the quarter and implying further growth. The price at which the new homes will be sold, too, is on the rise, with the average sales order price up 31% to $641,000.

The total backlog of work to be done increased 32%, and Taylor Morrison now has 10,273 orders still to be built.

Now what

With a stock valued at $3.5 billion and net debt of $2.9 billion, Taylor Morrison can perhaps best be viewed as an "enterprise" valued at $6.4 billion. Relative to the stock's $485 million in trailing profits, that works out to a debt-adjusted P/E ratio of about 13.2 -- not at all a bad price for a company that just turned in 54% profit growth.

The big question for investors, of course, is how much longer Taylor Morrison can keep the growth going. But with analysts polled by S&P Global Market Intelligence forecasting 2023 earnings 40% above what Taylor Morrison is expected to earn this year, I'd say this stock still has plenty of gas left in the tank.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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