D.R. Horton, Inc.

DHI Details

D.R. Horton, Inc. (NYSE: DHI) is the largest homebuilding company in the US by volume. DHI is engaged in building and selling single-family houses in the entry-level and move-up markets. It has an operation in 98 markets in 31 states in the Southeast, South Central, West, East, Midwest, and Southwest of the United States. Its operating segments are 1) Homebuilding, 2) Forestar, and 3) Financial Services. As of November 24, 2021, the company's market capitalization stood at USD 36.04 billion.

Latest News:

• Management Change: On September 30, 2021, DHI promoted Paul J. Romanowski as its Executive Vice President and Co-Chief Operating Officer, effective October 01, 2021. Mr. Romanowski has been associated with DHI since 1999.

FY21 Results:

• Surge in Topline: The company reported YoY growth of 36.74% in revenue to USD 27.77 billion in FY21 (ended September 30, 2021) from USD 20.31 billion in FY20.
• Expansion in Profitability: Net income (attributable to common shareholders) for FY21 rose 75.92% YoY and stood at USD 4.18 billion vs. USD 2.37 billion in FY20.
• Share Repurchase: In Q4FY21, DHI repurchased 2.3 million common shares for USD 212.6 million, with USD 546.2 million remaining under the stock repurchase authorization at quarter-end.
• Quarterly Dividend: In October 2021, the company's board declared a quarterly dividend of USD 0.225 per common share, payable on December 15, 2021, to shareholders of record on December 06, 2021.
• Cash and Debt Position: As of September 30, 2021, the company's cash balance stood at USD 3.21 billion, with a total debt of USD 5.41 billion.

Key Risks:

• Operates in a Cyclical Industry: Homebuilding and land development are cyclical sectors that are affected by changing economic conditions. Therefore, an unfavorable real estate market or other conditions such as employment levels, consumer spending, availability of financing, housing demand, etc., could harm the company's financial performance.

Outlook:

• FY22 Estimates: As of November 09, 2021, the company expects its FY22 revenues to range from USD 32.5 to 33.5 billion. In addition, its total homes closed range for FY22 is 90,000 – 92,000.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

DHI Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

DHI's stock price has increased 36.07% in the past twelve months and is leaning towards the higher end of its 52-week range of USD 64.32 to USD 106.89. The stock is trading above its 50 and 200 DMA levels, and its RSI Index is at 67.69. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 93.41.

Considering the uptick in the stock price and technical indicators, we believe the decent business fundamentals are adequately reflected at trading levels. Hence, we recommend a "Sell" rating on the stock at the closing price of USD 101.09, down 0.65% as of November 24, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

F5 Networks, Inc.

FFIV Details

F5 Networks, Inc. (NASDAQ: FFIV) is a leading multi-cloud application services provider that enables customers to design, deploy, operate, and administer applications in any architecture, from on-premises to the public cloud. In the Americas (mainly the United States), Europe, the Middle East, and Africa (EMEA), and the Asia Pacific area (APAC), it markets and sells its products mainly through several indirect sales channels. As of November 24, 2021, the company's market capitalization stood at USD 14.21 billion.

Latest News:

• Inducement Program: FFIV reported on November 02, 2021, that it had distributed a total of 25,838 restricted stock units (RSUs) to 28 employees who joined F5 due to the acquisition of Threat Stack, Inc., which was finalized on October 01, 2021. On November 01, 2022, the RSUs vest at a rate of 25%. The remaining 75% will be vested in three equal quarterly increments if the employee remains employed with F5 over the next three years.

FY21 Results:

• Growth in Revenues: The company's total revenues increased by 10.75% to USD 2.60 billion during FY21 (ended September 30, 2021) from USD 2.35 billion during FY20, owing to growth in both the products and services divisions.
• Surge in Net Income: FFIV witnessed an increase in net income to USD 331.24 million during FY21 vs. USD 307.44 million during FY20.
• Healthy Balance Sheet: As of September 30, 2021, the company's cash and cash equivalents (including short term investments) stood at USD 910.61 million, with a total debt of USD 369.05 million.

Key Risks:

• Decline in ASPs: Due to competitive pricing pressures, higher sales discounts, or new product improvements, FFIV's average selling prices (ASPs) may decline in the future. As a result, failure to introduce new products and product enhancements on a timely basis could drop revenue and profits, which would be detrimental to the company's financial health.
• Supplier Concentration Risk: FFIV outsources its manufacturing to a single contract manufacturer with which it does not have a long-term relationship. As a result, the company's operational and financial health could be jeopardized if its agreement with this single source of hardware assembly was terminated or otherwise harmed.

Outlook:

• Q1FY22 Estimates: FFIV reported on October 26, 2021, that it anticipated revenue in the range of USD 665-685 million for Q1FY22, with non-GAAP earnings of USD 2.71-2.83 per diluted share.
• FY22 Estimates: FFIV further estimated its FY22 revenue growth to be around 8-9%, including 35-40% in software revenue growth.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

FFIV Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

FFIV's share price has surged 40.79% in the past twelve months and is trading around the higher-band of the 52-week range of USD 160.85 to USD 239.12. The stock is trading above its 50 and 200 DMA levels, and its RSI Index is at 63.457. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 220.06.

Considering the significant uptick in the stock price and other technical indicators, we believe the decent business fundamentals are adequately reflected at the trading levels. Hence, we recommend a "Sell" rating on the stock at the closing price of USD 232.07, up 0.48% as of November 24, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.