DR Horton Inc (DHI)

Conclusion

DR Horton is a US homebuilder that constructs and sells single-family and attached homes in 126 markets across 36 states, and also provides mortgage financing, title services and rental properties. At 155.61 USD on 2026-11-09, the shares carry a market capitalisation of 42.24 billion USD and an enterprise value of 46.23 billion USD.

The verdict is fair. Against their own ten-year medians, the P/E of 14.6 sits at a premium of 27.1% to a median of 11.5, and EV/EBITDA of 11.5 at a premium of 26.9% to a median of 9.1. Price to free cash flow of 12.6 is at a discount of 53.7% to its median of 27.3. The DCF gives 200.35 USD per share at a discount rate of 11.74%. The fair value from historical multiples is 152.89 USD, and the fair value band runs from 141.29 to 211.94 USD with a midpoint of 176.62 USD, a margin of safety of 13.5%. The reverse DCF implies growth of 5.0% a year, against revenue growth of 3.5% over five years and free cash flow per share growth of 74.2% over five years.

The strongest numbers are a current ratio of 6.01, a trailing free cash flow conversion of 115.8% and net debt to EBITDA of 0.99. The weakest are a ROIC of 10.8% against a WACC of 10.9%, an EPS compound growth of -9.9% over three years, and a 24.7% cut to current-year estimates over 90 days.

Financial health

Financial strength is green, held up by a current ratio of 6.01, net debt to EBITDA of 0.99 and an Altman Z-score of 5.80 in the safe zone. The Altman model was designed for manufacturers, so its zone should be read with that limit in mind for a homebuilder. Debt to equity is 0.26. Insolvency risk: low, about 0.02% by the estimate of the Ohlson model over one to two years. The quick ratio is not available. Interest coverage is not available because the company does not report its interest expense.

Earnings quality

Earnings quality is green. Free cash flow conversion is 115.8% on a trailing basis and 60.6% over five years. The accrual ratio is -1.8%, stock-based compensation is 0.4% of revenue, and free cash flow after stock-based compensation is 3.21 billion USD. The share count has shrunk at an annual rate of -4.8% over five years, which points to buybacks. The Piotroski score is 5 of 8 evaluable criteria. The Beneish M-score reading is not available. The company beat estimates in 5 of the last 8 quarters, with an average surprise of 2.7%. Estimate revisions are negative: the current year fell 24.7% over 90 days, with 8 downward revisions and no upward ones in the last 30 days, and the next year fell 21.0% over the same period.

Profitability

Profitability is yellow. The gross margin is 22.3% against a ten-year median of 24.0%, the operating margin is 10.9% against 13.7%, and the net margin is 8.7% against 11.1%. Operating margin stability is 0.248. ROIC is 10.8% against a WACC of 10.9%, a ROIC minus WACC value of -0.08%, which is neutral. The five-year median ROIC is 17.7%. The DuPont split shows a net margin of 8.7%, an asset turnover of 0.95 and an equity multiplier of 1.51, giving a return on equity of 12.5%. Leverage adds only modestly to that return, so the return rests mainly on the operating business, and that business is currently earning close to its cost of capital.

Growth

Growth is yellow. Revenue compound growth is 10.5% over ten years, 3.5% over five years and -2.3% over three years. EPS compound growth is 15.7% over ten years, -2.4% over five years and -9.9% over three years. Free cash flow per share grew 23.5% a year over ten years, 74.2% over five years and fell 1.1% a year over three years. Revenue grew in 8 of the 10 comparable years. Analysts expect next-year EPS to grow 21.8%.

Valuation

Valuation is yellow. The P/E of 14.6 is at a premium of 27.1% to its ten-year median, EV/EBITDA of 11.5 at a premium of 26.9%, and price to free cash flow of 12.6 at a discount of 53.7%. Price to sales of 1.28 is at a premium of 1.8% to its median of 1.26, and price to book of 1.83 is at a discount of 6.5% to 1.95. The DCF gives 200.35 USD per share at a discount rate of 11.74%, and 46.9% of that value comes from the terminal value, so it should be read with caution. The fair value from historical multiples is 152.89 USD. The fair value band of 141.29 to 211.94 USD is an order of magnitude built on fixed assumptions, including a 5% equity risk premium and capped growth, not a price target. The reverse DCF implies growth of 5.0%, against five-year revenue growth of 3.5%. The dividend yield is 1.2%, the forward yield 1.3%, and the payout on free cash flow 15.3%.

Risks

The weakest numbers point to specific risks. A ROIC just below the WACC means that new capital is not yet earning more than it costs, and a further fall in margins would push returns lower. Three-year EPS compound growth of -9.9% and the estimate cuts of 24.7% for the current year suggest that earnings may fall further before they recover. A net margin of 8.7% against a median of 11.1% leaves less room for error if housing demand weakens. Half of the DCF value rests on the terminal assumptions, so a change in long-term growth or the discount rate would move the result a great deal. The cost of debt is assumed rather than observed, and the company does not report its interest expense, so interest coverage and the cost of debt cannot be verified. The quick ratio and the Beneish M-score reading are not available. This analysis does not include a debt maturity schedule or revenue by segment.