Pro Picks: Nail Down PulteGroup Before the Next Surge

  • Stock Market Analysis

After a brief hiatus, we’re back with a fresh set of Pro Picks - and PulteGroup Inc (NYSE: PHM ) is a rock-solid highlight among four top stocks that have not only earned top InvestingPro health ratings, but are also wildly undervalued per both InvestingPro's calculations and Wall Street analysts.

Headquartered in Atlanta, PulteGroup is a powerhouse residential homebuilder whose latest earnings report throttled profit estimates by $0.71 per share while also coming in well ahead of sales targets. Both Deutsche Bank (ETR: DBKGn ) and Oppenheimer call it a Top Pick, and analysts polled by InvestingPro overall figure the stock has at least 30% upside ahead.

That squares with the Great Performance health rating it has achieved on InvestingPro, underpinned by an impressive raw score of 3.67 out of 5, which puts it in rare company: For the past 7 years, a portfolio of stocks with a 2.75+ raw score has significantly outperformed the S&P 500. If that weren't enough, InvestingPro’s fair value algorithm puts share upside at an astonishing 50%+ above current levels.

All of this week’s Pro Picks have clinched well-above-2.75 health scores, as well, while also rating as supremely undervalued.

Returning to PulteGroup, the company yields a lofty return on invested capital and consistently drives its earnings per share higher, and has notched a nearly 100% average return on both assets and invested capital over the past two years. Its trends in revenue and operating income are also top-shelf, with 100% scores achieved in both, per InvestingPro metrics.

With all that, its price-to-earnings ratio is at a bargain basement 6.4x.

Deutsche Bank has high hopes for the firm, saying in May, “We expect to see PHM pull all the right levers to execute on a dual strategy of faster growth and increased capital efficiency,” adding that they also envision PHM sustaining higher profit margins.

PulteGroup shares are up nearly 60% year to date, but all indications say the rally is just getting started.

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Data as of Sept. 22, 2023.

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