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Investing.com - Wolfe Research downgraded TRI Pointe Homes (NYSE:TPH) from Outperform to Peerperform on Monday, citing concerns about near-term growth catalysts. The stock, currently trading at an attractive P/E ratio of 8, appears undervalued according to InvestingPro analysis, which reveals several additional valuation metrics and growth indicators available to subscribers.
The research firm expects third-quarter orders to remain challenged, projecting a 17% year-over-year decline following two consecutive quarters of approximately 30% order decreases. TRI Pointe’s backlog has already fallen 44% compared to the same period last year. Despite these challenges, the company maintains strong liquidity with a current ratio of 11.95, significantly exceeding its short-term obligations.
Wolfe Research believes TRI Pointe will rely on spec homes in the second half of 2025 to achieve its closing guidance, which adds risk that the company might miss either volume or gross margin targets given current market volatility.
The firm reduced its 2025 earnings per share estimate by 12% to $2.65, representing a 45% year-over-year decline, and projects an additional 13% year-over-year drop in 2026 to $2.30 as the company transitions back toward a more normalized built-to-order/spec mix.
Wolfe Research noted this transition is "not exclusively a TPH phenomenon," but rather a "painful process" that any builder intending to normalize its built-to-order mix will experience without a significant demand rebound. Notably, management has shown confidence in the company’s future by actively buying back shares. For deeper insights into TPH’s financial health and growth prospects, access the comprehensive Pro Research Report available on InvestingPro.
In other recent news, TRI Pointe Homes Inc. reported its second-quarter 2025 earnings, where the company missed earnings per share (EPS) forecasts but surpassed revenue expectations. This performance highlights TRI Pointe Homes’ ability to generate strong revenue despite the challenging market conditions. The earnings shortfall, however, has raised some concerns among investors, as reflected in the company’s stock performance. Analysts had anticipated a stronger EPS, making the miss a notable point of discussion. The resilience in revenue suggests that the company has been able to maintain its sales momentum. These developments come amid a broader context of economic challenges impacting the sector. Investors are closely monitoring how TRI Pointe Homes will navigate these conditions moving forward.
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