NVR Inc Is an Undiscovered Gem in the Housing Sector

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Source: Thinkstock

Source: Thinkstock

NVR Inc. (NYSE:NVR) is one of my favorite homebuilders in the United States. A lot of traders are not in this name; it is investable for the long-term with little volatility. It competes primarily with DR Horton (NYSE:DHI) in the home building space. Relative to the home builders index, that is the SPDR Series Trust Homebuilders ETF (NYSEARCA:XHB), NVR is the much better purchase. The SPD Series Homebuilders ETF is up just one percent in the last year, whereas DR Horton is up 11 percent, and NVR is up 17 percent.

Like DR Horton, the NVR has a substantial homebuilding segment, and also has a mortgage bank segment. NVR is engaged in the construction and sale of single-family detached homes, townhomes, and condominium buildings under the Ryan Homes, NVHomes, Fox Ridge Homes, and Heartland Homes trade names. The company markets its Ryan Homes and Fox Ridge Homes products to first-time and first-time move-up buyers. It markets NVHomes and Heartland Homes products to move-up and up-scale buyers. NVR primarily markets its products in Maryland, Virginia, West Virginia, Delaware, Washington, D.C, New Jersey, Pennsylvania, New York, Ohio, Indiana, and Illinois. It has some southern exposure in North Carolina, South Carolina, Tennessee, and Florida. It also offers various mortgage banking services to its homebuilding customers, including mortgage financing and title insurance brokerage, as well as performs title searches in connection with mortgage loan closings.

What is most impressive is the company’s performance, which has far outpaced DR Horton as well as the Homebuilder ETF’s average components. Income for its second-quarter was $68,178,000, or $15.17 per diluted share. Net income and diluted earnings per share for its quarter increased 34 percent and 50 percent, respectively, when compared to the 2013 second-quarter. That is incredible growth that should be catching everyone’s attention. Consolidated revenues for the second-quarter of 2014 totaled $1,102,054,000, a 9 percent increase from $1,009,892,000 for the comparable 2013 quarter. Looking at the first half of the year here in 2014, consolidated revenues were $1,913,364,000, 7 percent higher than the $1,780,148,000 reported for the same period of 2013. Net income for the year is $92,027,000, an increase of 7 percent when compared to the six months ended June 30, 2013. Diluted earnings per share was $20.19, an increase of 19 percent from $16.92 per diluted share for the comparable period of 2013.

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