PULTEGROUP, INC. (PHM): what the price requires
At today's price, PULTEGROUP, INC. (PHM) is priced for -2.7% growth. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/PHM
Headline
| Field | Value |
|---|---|
| Ticker | PHM |
| Company | PULTEGROUP, INC. |
| Current price | $123.36/sh |
| Composition | Northeast 7% / Southeast 17% / Florida 25% / Midwest 16% / Texas 10% / West 23% / Financial Services 2% |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | whole-company |
| Operating margin (mid-cycle) | 16.2% |
| Implied growth | -2.7% |
| Multiple paid | 9x mid-cycle operating income |
Solve inputs: computed at a 10.4% cost of capital with 4% terminal growth over a 5-year stage; each 1pp of cost of capital moves the implied operating-profit growth ~4.6pp.
How unusual the bet is: within-range (limited comparison data)
| Reference | Value |
|---|---|
| vs own history | -1.62σ |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by asset-based and relative-multiple value. A value/asset-supported name, not a pure growth bet.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 0.91x | 4 | justifies |
| Earnings | 1.36x | 4 | expensive |
| Relative | 0.92x | 2 | justifies |
| Growth | 1.45x | 3 | expensive |
Families that justify the price: Asset, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.6%); the inversion above states its own rate.
Per-Model Detail (n=13)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | $84.86 | 1.45x | yes | FCF base $1.8B, growth -6% (input: historical growth), terminal g 0.5%, WACC 8.6%, 5yr projection |
| DCF Exit Multiple | Growth | $123.50 | 1.00x | yes | Exit EV/EBITDA: 222.2x / 224.2x / 226.2x (bear / base = today's held flat / bull), 5yr |
| Relative Valuation | Relative | $97.27 | 1.27x | yes | P/E 18x (static sector reference · 2026-04), scenarios: 15.3x / 18.0x / 20.7x (bear / base = reference held flat / bull), EV/EBITDA 26.4x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $114.20 | 1.08x | yes | BV/sh $66.98, ROE (TTM) 15.8%, ke 9.3% |
| Two-Stage Excess Return | Asset | $147.24 | 0.84x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $63.81 | 1.93x | yes | Rev $16.8B, growth -6% (input: historical growth; tapered), Terminal P/S: 1.2x / 1.4x / 1.6x (bear / base = today's held flat / bull, cap 8x) |
| Growth-Adjusted P/E | Relative | — | — | no | — |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | — | — | no | — |
| Residual Income | Asset | $150.02 | 0.82x | yes | BV $66.98 + 5yr PV of (ROE (TTM) 15.8% − Kₑ 9.3%) × BV; BV grows 8.8%/yr |
| Graham Number | Asset | $124.83 | 0.99x | yes | √(22.5 × EPS $10.34 × BVPS $66.98) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | $0.05 | 2467.20x | yes | EBITDA $0.11B × sector EV/EBITDA 12.0x (excluded from median) |
| FCF Yield | Earnings | $92.48 | 1.33x | yes | FCF $1778.3M / Kₑ 9.3% — zero-growth perpetuity |
| SBC-Adj FCF Yield | Earnings | $89.35 | 1.38x | yes | SBC-adj FCF $1.72B (FCF $1.78B − SBC $0.06B) capitalized at Kₑ |
| Ben Graham Formula | Earnings | $8.67 | 14.23x | yes | EPS $10.34 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | $217.52 | 0.57x | yes | Revenue $16.83B × sector P/S 2.5x |
| PEG Fair Value | Relative | — | — | no | — |
| Earnings Yield | Earnings | $111.78 | 1.10x | yes | EPS $10.34 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Share count CAGR (buyback) | -5.9% |
| Burning cash | no |
Operating profit is negative or near zero and the company has no demonstrated through-cycle (mid-cycle) operating margin to normalize against, so years-to-repay cannot be computed honestly.
Operating profit is negative or near zero and there is no demonstrated through-cycle (mid-cycle) operating margin to normalize against, so interest coverage cannot be computed honestly.
Bullet Takeaways
- PulteGroup is one of the largest US homebuilders, operating across Florida, the West, the Southeast, the Midwest, and Texas, and deliberately spreading its business across first-time, move-up, and active-adult buyers rather than betting on one.
- The balance sheet is the standout: the company is essentially debt-free, with net debt near zero, and it has been buying back stock aggressively, retiring about 6% of shares a year.
- The defining risk is mortgage rates and affordability, which compressed gross margin by 310 basis points to 24.4% in the latest quarter as the company leaned on incentives and rate buydowns to keep homes moving.
Bull Case
PulteGroup is best read through its stage in the housing cycle, and the right framing is a mature, cycle-tested builder that has used the strong years to fortify itself rather than to overextend. The clearest evidence is the balance sheet. Most homebuilders carry meaningful debt because land and construction are capital-hungry, but Pulte has driven its net debt to essentially zero. A debt-free homebuilder is a different animal in a downturn: it does not face the forced land sales and fire-sale pricing that levered builders do when demand drops, and it can keep buying land when others cannot. That financial position turns the cycle from a threat into an opportunity.
The land strategy is the operational expression of the same discipline. Rather than owning all its lots outright, which ties up capital and concentrates risk, Pulte controls a large share through options. The 10-K describes the approach: the company enters "land option agreements" where it provides "a deposit to the seller as consideration for the right to purchase land at different times in the future, usually at predetermined prices." Optioned land lets Pulte walk away for the cost of the deposit if a market sours, rather than being stuck owning lots it overpaid for. Combined with a deliberately diversified buyer mix across "first-time, move-up, and active adult" groups, the model is built to be less volatile than a builder concentrated in one segment or one region.
The capital return makes the per-share math compelling. Pulte generates about $1.8 billion in free cash flow, earns a return on equity near 16%, and trades at roughly 12 times earnings, a low multiple that reflects the market's discount for cyclicality. With that cash it has been retiring about 6% of its shares a year, and it authorized a fresh $1.5 billion buyback, repurchasing over $300 million in a single quarter. Net new orders still grew in the latest quarter, up about 3% with community count up about 9%, and Florida orders rose double digits. The bull case is a fortress-balance-sheet builder buying back a large slice of itself at a low multiple while the housing cycle works through a soft patch.
Bear Case
The variable with the most leverage over PulteGroup is the mortgage rate, and it is currently working against the company. Homebuilding demand is, at its core, a function of affordability, and affordability is set by home prices and borrowing costs together. With mortgage rates elevated, buyers can afford less house, and Pulte has been bridging the gap with incentives and rate buydowns, paying down buyers' mortgage rates to keep homes selling. Those incentives are not free; they come straight out of gross margin. The latest quarter shows the cost: gross margin compressed 310 basis points to 24.4%, with incentives reaching about 10.9% of the gross sales price, and net income fell about 34% year over year. The orders are holding because Pulte is buying them with margin, and that is a trade that erodes profitability the longer rates stay high.
The valuation reflects a cyclical peak that is already rolling over, and the methods are split in a telling way. The growth-oriented methods read the stock as expensive, because they capitalize an earnings trajectory that is declining, the price embeds a slight contraction in operating income, not growth. The asset-based and relative methods support the price, anchored on a book value of about $66.98 per share and a low earnings multiple, but those lenses are valuing peak-cycle earnings and a book value built up during the strong years. Homebuilder earnings are notoriously mean-reverting: a 24% gross margin is well above the mid-teens trough the industry sees in downturns, and a stock that looks cheap at 12 times peak earnings can look expensive at 12 times trough earnings if the cycle turns hard. The low multiple is the market correctly pricing the cyclicality, not a free discount.
The cycle risk is structural and outside management's control. A recession that raises unemployment, a further leg up in mortgage rates, or a broad decline in home prices would hit Pulte on volume and margin simultaneously, and the geographic diversification only spreads the exposure, it does not remove it. Florida, the company's largest market, has its own risks from insurance costs and a softening regional housing market. The debt-free balance sheet genuinely bounds the downside, Pulte will not face solvency stress, but a strong balance sheet does not protect earnings from a demand downturn. The bear case is that the buyer is purchasing a cyclical at a point where margins are already compressing and the price capitalizes a level of profitability that the housing cycle does not sustain through a downturn.
Valuation
PulteGroup is a cyclical homebuilder, and the central valuation question is whether today's earnings are normal or near a peak. The price is making a cautious bet by the standards of a growth stock, the inversion embeds a slight decline in operating income, around negative 1%, which means the market is not extrapolating the strong years forward. That is the appropriate framing for a cyclical: the price is paying for roughly current-to-slightly-declining earnings, not for growth, which is why the value methods support it while the growth methods do not.
The methods split along the cyclicality fault line. The asset-based methods, anchored on a book value of about $66.98 per share and the return on equity earned above the cost of equity, land at or above the price, and the relative lens, at roughly an 18 times sector earnings multiple against Pulte's own 12 times, also supports it. But the growth methods read the stock as expensive, because they project the declining earnings trajectory forward and discount it. The split is the signal: on current book value and current earnings, the stock is fairly-to-cheaply priced; on a forward view that credits the margin compression already underway, it is less clearly cheap. The honest read is that this is a value-supported name where the value rests on peak-cycle book value and earnings, and the discount the low multiple offers is partly compensation for the risk that those normalize downward.
Solvency is the genuine strength and the clearest part of the thesis. Net debt is essentially zero, an exceptional position for a homebuilder, which means Pulte carries none of the leverage risk that turns a housing downturn into a crisis for weaker builders. The share count is falling about 6% a year through an aggressive, well-funded buyback. For a cyclical, that combination, no leverage plus heavy capital return, is the ideal posture going into an uncertain cycle: it bounds the downside and compounds per-share value while the multiple is low. What the buyer is underwriting is the housing cycle: at this price the bet is that demand holds well enough that the incentive-driven margin compression is a soft patch rather than the start of a trough, with the debt-free balance sheet and the buyback as the cushion if it proves to be the latter.
Catalysts
PulteGroup's Q1 2026 print showed the cycle's pressure and the company's resilience at once. Home sale revenue was about $3.3 billion with GAAP EPS of $1.79, but net income fell about 34% as gross margin compressed 310 basis points to 24.4% on higher incentives, which reached about 10.9% of the gross sales price. Net new orders still rose about 3% to roughly 8,034 homes, with Florida orders up about 18% and community count up about 9% to 1,043. For full-year 2026 the company guided to closings of 28,500 to 29,000 homes, gross margin of 24.5% to 25.0%, and an average sales price of $550,000 to $560,000. The next quarterly prints are the read on whether order growth holds and whether margin stabilizes in the guided range or keeps compressing.
The catalysts that govern the thesis are mortgage rates and the buyback. Affordability is set by rates, so any move in mortgage rates directly changes how much incentive Pulte must spend to sell a home, which flows straight to margin. The company authorized a new $1.5 billion repurchase program and bought back over $300 million of stock in the first quarter, so the pace of buyback against the falling share count is the lever driving per-share value while the cycle works through. Analyst sentiment is broadly positive, with multiple firms raising price targets into the $140 to $151 range above the current price. The developments to watch are the direction of mortgage rates, the trend in incentive levels and gross margin, and the buyback cadence, since those three determine whether the soft patch is temporary or the leading edge of a cyclical downturn.
Peer Cohorts (Per Segment, With Filing Citations)
Florida / Texas (reported)
- LEN (LENNAR CORP /NEW/)
- (no filing in the citation store)
- DHI (D.R. Horton, Inc.)
- (no filing in the citation store)
- TOL (Toll Brothers, Inc.)
- (no filing in the citation store)
- KBH (KB HOME)
- (no filing in the citation store)
- MHO (M/I HOMES, INC.)
- (no filing in the citation store)
- CCS (Century Communities, Inc.)
- (no filing in the citation store)
- TMHC (Taylor Morrison Home Corp)
- (no filing in the citation store)
- TPH (Tri Pointe Homes, Inc.)
- (no filing in the citation store)
Financial Services (reported)
- RKT (Rocket Companies, Inc.)
- (no filing in the citation store)
- UWMC (UWM HOLDINGS CORPORATION)
- (no filing in the citation store)
- PFSI (PennyMac Financial Services, Inc.)
- (no filing in the citation store)
- WD (Walker & Dunlop, Inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
PulteGroup Q1 2026 results, 2026 · PulteGroup FY2026 guidance, 2026 · analyst notes, 2026