What Is Taylor Morrison Home Corporation’s (NYSE:TMHC) Share Price Doing?

Taylor Morrison Home Corporation (NYSE:TMHC), is not the largest company out there, but it saw a significant share price rise of over 20% in the past couple of months on the NYSE. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Today I will analyse the most recent data on Taylor Morrison Home’s outlook and valuation to see if the opportunity still exists.

See our latest analysis for Taylor Morrison Home

Is Taylor Morrison Home Still Cheap?

The share price seems sensible at the moment according to my price multiple model, where I compare the company’s price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Taylor Morrison Home’s ratio of 3.69x is trading slightly below its industry peers’ ratio of 6.84x, which means if you buy Taylor Morrison Home today, you’d be paying a decent price for it. And if you believe that Taylor Morrison Home should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since Taylor Morrison Home’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will Taylor Morrison Home generate?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. Though in the case of Taylor Morrison Home, it is expected to deliver a highly negative earnings growth in the next few years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Currently, TMHC appears to be trading around industry price multiples, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock optimal for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on TMHC, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping an eye on TMHC for a while, now may not be the most advantageous time to buy, given it is trading around industry price multiples. This means there’s less benefit from mispricing. In addition to this, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help crystallize your views on TMHC should the price fluctuate below the industry PE ratio.

In light of this, if you’d like to do more analysis on the company, it’s vital to be informed of the risks involved. For example, we’ve found that Taylor Morrison Home has 3 warning signs (1 is a bit unpleasant!) that deserve your attention before going any further with your analysis.

If you are no longer interested in Taylor Morrison Home, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.