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Forestar Group Inc (FOR)
NYSE:FOR
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Forestar Group
(NYSE:FOR)
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Rating:66Neutral
Price Target:
$30.00
▲(15.56% Upside)
Action:DowngradedDate:01/23/26
The score is driven mainly by solid but uneven fundamentals (good growth and reasonable leverage, offset by volatile cash generation) and a constructive earnings call (reiterated guidance, strong liquidity and backlog) alongside an attractive low P/E valuation. Technical signals are mixed and do not add strong support.
Positive Factors
Strong liquidity and conservative capital structure
Substantial liquidity and an undrawn revolver provide durable financial flexibility for a cyclical land developer. This buffer supports continued land investments, absorbs timing mismatches in lot settlements, and reduces refinancing risk through downcycles, enabling the company to execute its multi‑hundred‑million dollar investment plan without immediate funding stress.
Large contracted backlog provides revenue visibility
A sizable backlog secured by earnest money improves near‑term revenue and cash visibility versus developers reliant solely on market timing. This contracted pipeline lowers execution uncertainty for committed lots, supports planned lot deliveries, and underpins forecastability of cash flow and capacity planning over the next 12–36 months.
Disciplined underwriting and investment hurdles
A formal underwriting floor and payback target embed project-level discipline into land acquisition and development decisions. Over the medium term this constraint should help preserve margin pools, avoid overpaying for inventory, and improve capital efficiency by prioritizing opportunities with defined returns and shorter cash recovery horizons.
Negative Factors
Volatile cash generation
Development cash flow volatility reflects timing of lot settlements, working capital swings and project execution variability. Persistent or recurring free cash flow swings can strain reinvestment capacity, force incremental financing at inopportune times, and make it harder to sustain a steady investment cadence or return targets despite healthy accounting profits in some periods.
Margin compression and mix risk
Compression of gross margins reduces the spread between finished‑lot sale prices and cumulative development costs, directly pressuring pretax returns. Mix‑driven margin variability implies less predictable profitability by quarter and could erode long‑term ROE if higher‑margin opportunities are not consistently available or if volume growth forces acceptance of lower‑return projects.
Regional demand concentration and investment execution risk
Exposure to regions facing elevated resale inventory and affordability headwinds concentrates market risk. Combined with a large planned investment program (~$1.4B) and substantial near‑term spend, regional softness could amplify execution risk, prolong inventory holding periods and reduce realized returns on projects under construction in those geographies.
Forestar Group (FOR) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.32B
Dividend YieldN/A
Average Volume (3M)170.25K
Price to Earnings (P/E)20.4
Beta (1Y)0.79
Revenue Growth10.13%
EPS Growth-18.11%
CountryUS
Employees440
SectorReal Estate
Sector Strength53
IndustryReal Estate - Development
Share Statistics
EPS (TTM)0.30
Shares Outstanding50,892,080
10 Day Avg. Volume134,992
30 Day Avg. Volume170,253
Financial Highlights & Ratios
PEG Ratio-0.44
Price to Book (P/B)0.77
Price to Sales (P/S)0.81
P/FCF Ratio-6.77
Enterprise Value/Market Cap1.45
Enterprise Value/Revenue1.14
Enterprise Value/Gross Profit5.28
Enterprise Value/Ebitda9.08
Forecast
1Y Price Target
$32.00Price Target Upside23.27% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
EPS Forecast (FY)3
Revenue Forecast (FY)$1.65B
Forestar Group Business Overview & Revenue Model
Company DescriptionForestar Group Inc. operates as a residential lot development company in the United States. The acquires land and develops infrastructure for single-family residential communities. It sells its residential single-family finished lots to homebuilders. The company is headquartered in Arlington, Texas. Forestar Group Inc. is a subsidiary of D.R. Horton, Inc.
How the Company Makes MoneyForestar Group generates revenue primarily through the sale of developed residential and commercial lots to homebuilders and other developers. The company acquires land and enhances its value through zoning, infrastructure development, and community planning, allowing it to sell these lots at a premium. Additionally, Forestar earns revenue through its homebuilding operations, where it constructs and sells homes directly to consumers. Key revenue streams also include joint ventures and partnerships with other developers and builders, which help to mitigate risk and expand its market reach. The demand for housing and favorable market conditions contribute significantly to Forestar's earnings, supported by its strategic positioning in high-growth regions.
Forestar Group Earnings Call Summary
Earnings Call Date:Jan 20, 2026
(Q1-2026)
| % Change Since: |
Next Earnings Date:Apr 21, 2026
Earnings Call Sentiment Positive
The call presents a generally positive operational and financial position: revenue growth (+9% YoY), a 10% increase in book value per share, strong liquidity ($820M), and a large contracted backlog (~$2.2B) and strategic customer relationships (notably D.R. Horton). These strengths are tempered by modest declines in net income and margins, gross margin pressure driven by mix and a low-margin track sale, and near-term demand headwinds tied to affordability and regional resale inventory. Management is maintaining guidance and emphasizing disciplined underwriting, capital flexibility, and operational execution, which supports confidence in navigating the current environment.Q1-2026 Updates
Positive Updates
Revenue Growth and Volume
Q1 revenues of $273 million, up 9% year-over-year from $250.4 million; 1,944 lots sold in the quarter. Management maintained fiscal 2026 revenue guidance of $1.6 billion to $1.7 billion and lot delivery guidance of 14,000 to 15,000 lots.
Improved Book Value Per Share
Book value per share increased 10% year-over-year to $35.10, reflecting strengthened equity value and capitalization.
Strong Liquidity and Conservative Capital Structure
Ended the quarter with approximately $820 million of liquidity (including $212 million unrestricted cash and $608 million undrawn revolver). Total debt $793 million, net debt to capital ratio 24.6%, and no senior note maturities in the next 12 months.
Robust Backlog and Contracted Revenue Visibility
$210 million of hard earnest money deposits securing contracts expected to generate approximately $2.2 billion of future revenue, indicating strong contracted backlog and revenue visibility.
Anchored Customer Relationship with D.R. Horton
D.R. Horton remains a strategic partner: 16% of their starts in the past 12 months were on Forestar-developed lots and 23% of their finished lot purchases were Forestar lots. 28% of owned lots are subject to a right of first offer to D.R. Horton, and management targets growing share with a goal of 1 in 3 homes on Forestar lots.
Active Investment and Disciplined Underwriting
Invested $415 million in land and land development in Q1 (≈75% development, 25% acquisition). Underwriting discipline remains: minimum 15% pretax return on average inventory and return of initial cash investment within 36 months. Company expects to invest ~ $1.4 billion in land acquisition and development in fiscal 2026, subject to market conditions.
Operational and Cost Discipline
SG&A was $36.5 million (13.4% of revenues) versus $36.0 million (14.4% of revenues) prior year; headcount decreased ~3% year-over-year. Management reports land development costs and cycle times have stabilized and operational best practices are in place to drive efficiency.
Negative Updates
Decline in Net Income and Pretax Margins
Net income of $15.4 million ($0.30 diluted) vs $16.5 million ($0.32) prior year quarter. Pretax income $20.8 million vs $21.9 million prior, and pretax profit margin declined to 7.6% from 8.7% year-over-year (down 1.1 percentage points).
Lower Gross Profit Margin
Reported gross profit margin of 20.1% in Q1 vs 22.0% in the prior-year quarter (down 1.9 percentage points). Management noted the quarter was negatively impacted by a track sale with an unusually low margin; excluding that item, margin would have been ~21.5% but still reflects mix pressure.
Average Sales Price Volatility and Mix Risk
Average sales price for the quarter was $121,000 and was elevated due to an outsized mix of higher-price-point lot deliveries. Management expects continued quarterly fluctuations in ASP driven by geographic and lot-size mix, adding variability to revenue and margin comparisons.
Near-Term Demand Headwinds
Affordability constraints and cautious consumer sentiment are slowing the pace of new-home sales. Management specifically called out Texas and Florida as relatively more challenged markets with elevated resale inventory, prompting selective moderation of development activity in those states.
Investment and Execution Risk if Demand Softens
Although investment is disciplined, the company invested $415 million in Q1 and plans up to ~$1.4 billion for fiscal 2026 (subject to market conditions). Continued high investment levels could create risk to returns if demand or margins deteriorate more than expected.
Gross Margin Outlook Moderation
Management expects gross margins to be toward the lower end of historical range (21%–23%), implying potential continued margin pressure in a slower demand environment.
Company Guidance
Forestar reiterated fiscal 2026 guidance of $1.6–$1.7 billion in revenue and 14,000–15,000 lot deliveries, and said it still expects to invest roughly $1.4 billion in land acquisition and development (subject to market conditions) while underwriting new projects to a minimum 15% pretax return on average inventory and a return of initial cash within 36 months; the company finished Q1 with $820 million of liquidity (including $212 million unrestricted cash and $608 million undrawn on its revolver), $793 million of total debt (net debt to capital 24.6%), a $2.2 billion contracted backlog secured by $210 million of deposits, 101,000 total lots of which 65,600 (65%) are owned and 35,400 (35%) controlled, 10,400 owned finished lots (majority under contract), 24,100 owned lots (37%) under contract to sell, and invested $415 million in Q1 (~25% land acquisition, ~75% development), with book value per share up 10% year‑over‑year to $35.10.Forestar Group Financial Statement Overview
Summary
Income statement is solid (revenue growth with ~10% net margin) and leverage appears manageable, but cash flow quality is the main weakness due to historically volatile operating/free cash flow and a recent decline in free cash flow growth.Income Statement
FOR shows strong top-line momentum in TTM (Trailing-Twelve-Months), with revenue up sharply versus the prior period, and profitability remains solid with roughly 10% net margin and low-teens operating margin. However, margins and earnings are below the stronger 2024 levels (net margin and operating margin both compressed), indicating some mix/cost pressure even as revenue grows.72
Positive
Balance Sheet
Leverage looks manageable with debt under half of equity in TTM (Trailing-Twelve-Months), and equity has grown over time, supporting balance-sheet resilience for a developer. That said, returns on equity are moderate (~10% TTM) and below the peak levels seen in earlier years, suggesting the balance sheet is being used less efficiently than before.68
Positive
Cash Flow
Cash generation is the key swing factor: TTM (Trailing-Twelve-Months) operating cash flow and free cash flow are positive and roughly in line with net income, which is a constructive sign. But cash flows have been volatile year-to-year (including multiple years of negative operating and free cash flow), and the sharp decline in free cash flow growth highlights execution/working-capital sensitivity typical of development businesses.52
Neutral
| Breakdown | TTM | Sep 2025 | Sep 2024 | Sep 2023 | Sep 2022 | Sep 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 1.69B | 1.66B | 1.51B | 1.44B | 1.52B | 1.33B |
| Gross Profit | 363.50M | 363.50M | 359.30M | 304.10M | 324.00M | 229.20M |
| EBITDA | 211.30M | 222.80M | 243.80M | 209.40M | 233.10M | 163.50M |
| Net Income | 166.90M | 167.90M | 203.40M | 166.90M | 178.80M | 110.20M |
Balance Sheet | ||||||
| Total Assets | 3.18B | 3.14B | 2.84B | 2.47B | 2.34B | 2.10B |
| Cash, Cash Equivalents and Short-Term Investments | 211.70M | 379.20M | 481.20M | 616.00M | 264.80M | 153.60M |
| Total Debt | 809.80M | 817.10M | 716.60M | 703.10M | 714.10M | 711.80M |
| Total Liabilities | 1.39B | 1.37B | 1.25B | 1.10B | 1.14B | 1.09B |
| Stockholders Equity | 1.79B | 1.77B | 1.59B | 1.37B | 1.20B | 1.01B |
Cash Flow | ||||||
| Free Cash Flow | 93.70M | -199.90M | -160.60M | 362.80M | 105.20M | -304.70M |
| Operating Cash Flow | 95.30M | -197.70M | -158.40M | 364.10M | 108.70M | -303.10M |
| Investing Cash Flow | 2.20M | 3.20M | 7.30M | 300.00K | 1.30M | 1.00M |
| Financing Cash Flow | -17.80M | 92.50M | 16.30M | -13.20M | 1.20M | 61.40M |
Forestar Group Technical Analysis
Negative
25.96
Price Trends
27.11
Negative
26.31
Negative
25.16
Positive
Market Momentum
-0.11
Positive
34.71
Neutral
13.30
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FOR, the sentiment is Negative. The current price of 25.96 is below the 20-day moving average (MA) of 28.85, below the 50-day MA of 27.11, and above the 200-day MA of 25.16, indicating a neutral trend. The MACD of -0.11 indicates Positive momentum. The RSI at 34.71 is Neutral, neither overbought nor oversold. The STOCH value of 13.30 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for FOR.
Forestar Group Risk Analysis
Forestar Group disclosed 29 risk factors in its most recent earnings report. Forestar Group reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Forestar Group Peers Comparison
UnderperformOutperform
Sector (65)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $2.92B | 10.67 | 0.22% | 2.29% | 13.04% | -98.33% | |
72 Outperform | $130.51M | 23.89 | 8.04% | ― | -27.32% | -15.12% | |
66 Neutral | $1.32B | 20.39 | 9.82% | ― | 10.13% | -18.11% | |
65 Neutral | $2.17B | 12.19 | 3.79% | 4.94% | 3.15% | 1.96% | |
62 Neutral | $592.22M | 5.51 | 12.52% | ― | -1.52% | 81.35% | |
53 Neutral | $276.20M | 523.69 | 0.95% | ― | -0.58% | ― |
* Real Estate Sector Average
FOR
Forestar Group
25.96
3.83
17.31%
ARL
American Realty Investors
17.10
3.12
22.32%
AXR
Amrep
24.60
4.53
22.57%
FPH
Five Point Holdings
5.44
0.09
1.68%
OZ
Belpointe PREP
51.17
-26.87
-34.43%
VTMX
Corporacion Inmobiliaria Vesta S.A.B. de C.V. ADR
33.06
9.38
39.62%
Forestar Group Corporate Events
Executive/Board ChangesShareholder Meetings
Forestar Group Shareholders Back Board, Pay and Auditor
Positive
Jan 20, 2026
On January 19, 2026, Forestar Group held its Annual Meeting of Stockholders, where shareholders voted on the election of seven director nominees, an advisory approval of executive compensation, and the ratification of the company’s independent auditor for fiscal 2026. All seven director nominees were elected to serve until the 2027 Annual Meeting, the executive compensation program received shareholder approval, and Ernst & Young LLP was ratified as the independent registered public accounting firm for the fiscal year ending September 30, 2026, signaling broad investor support for the company’s current governance, pay practices and financial oversight arrangements.
The most recent analyst rating on (FOR) stock is a Buy with a $31.00 price target. To see the full list of analyst forecasts on Forestar Group stock, see the FOR Stock Forecast page.
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.