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Texas Capital Securities initiated coverage on Beazer Homes (NYSE:BZH) Monday with a buy rating and a $25.00 price target, joining other analysts who see significant upside potential with targets ranging from $32 to $41. Trading at just 7x earnings and 0.5x book value, InvestingPro analysis suggests the stock is currently undervalued. The homebuilder operates in 13 states across the West, East, and Southeast regions of the United States.
Texas Capital highlighted that Beazer is the first public homebuilder with essentially all new starts built to the Department of Energy’s Zero Energy Ready Home standard. This approach provides customers with energy-efficient homes that offer lower long-term ownership costs while maintaining affordable prices, though InvestingPro data shows the company operates with relatively thin gross profit margins of 16.6%.
The firm noted Beazer’s decade-long effort to reduce debt below $1 billion by the end of fiscal year 2022. While total debt currently stands at $1.1 billion with a debt-to-equity ratio of 0.9, the company has maintained its balanced growth strategy and began investing more in land acquisition and community count expansion in fiscal year 2023. Notably, the company maintains strong liquidity with a current ratio of 9.48.
Texas Capital expects moderate long-term growth from Beazer with potential valuation multiple expansion as the company’s balance sheet leverage decreases closer to peer averages. The firm believes this deleveraging strategy positions Beazer favorably compared to competitors.
While acknowledging that Beazer won’t be immune to broader industry trends, Texas Capital expects the homebuilder to outperform most peers, particularly as it continues to reduce its debt levels.
In other recent news, Beazer Homes USA Inc reported its second-quarter earnings for fiscal year 2025, surpassing analysts’ expectations with an earnings per share (EPS) of $0.42, compared to the forecasted $0.29. However, the company’s revenue fell short of expectations, coming in at $565.34 million against a forecast of $625.21 million. Despite the revenue miss, Beazer Homes repurchased $20 million in stock during the quarter and announced a new $100 million share repurchase program. The company remains focused on its strategic goals, including increasing its community count and enhancing book value per share. Analysts have noted Beazer Homes’ commitment to its long-term objectives, which include reducing land spending and achieving a double-digit growth rate in book value per share by fiscal 2027. The company has also been recognized for its innovative Zero Energy Ready homes, which contribute to better margins. Overall, Beazer Homes continues to adapt its capital allocation strategies in response to challenging market conditions.
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