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Forestar (FOR)
:FOR
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Forestar Group
(NYSE:FOR)
Rating:72Outperform
Price Target:
$22.00
▲(9.18%Upside)
Positive Factors
Analyst Recommendation
Analyst recommends a Buy rating for Forestar with a price target of $40.
Market Expansion
Forestar expanded into VA and reentered WA, OR, and UT, growing share against smaller, often under-capitalized peers.
Operational Efficiency
Operational efficiencies in a market constrained by regulatory delays are viewed positively.
Negative Factors
Valuation Concerns
Forestar is valued at 1.27 times its book value per share.
Forestar Group (FOR) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$1.02B
Dividend YieldN/A
Average Volume (3M)148.66K
Price to Earnings (P/E)6.1
Beta (1Y)0.90
Revenue Growth-5.60%
EPS Growth-17.86%
CountryUS
Employees440
SectorReal Estate
Sector Strength55
IndustryReal Estate - Development
Share Statistics
EPS (TTM)0.62
Shares Outstanding50,823,800
10 Day Avg. Volume147,399
30 Day Avg. Volume148,661
Financial Highlights & Ratios
PEG Ratio0.05
Price to Book (P/B)0.47
Price to Sales (P/S)0.00
P/FCF Ratio5.30
Enterprise Value/Market Cap0.98
Enterprise Value/Revenue0.17
Enterprise Value/Gross Profit2.95
Enterprise Value/Ebitda1.11
Forecast
1Y Price Target
$29.00Price Target Upside43.92% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering1
Forestar Group Business Overview & Revenue Model
Company DescriptionForestar Group Inc. (NYSE: FOR) is a residential lot development company headquartered in the United States. The company operates primarily in the real estate sector, focusing on the acquisition, entitlement, and development of land into finished residential lots for homebuilders. Forestar's core services include managing the process from land acquisition through development and delivery of finished residential lots to homebuilders, which are then used for constructing new homes.
How the Company Makes MoneyForestar Group makes money by developing residential lots and selling them to homebuilders. The company's revenue model is centered around the acquisition of raw land, obtaining the necessary entitlements and permits, developing the land into finished lots, and then selling these lots to homebuilders. Key revenue streams include the sale of developed residential lots and fees associated with the development process. The company may also engage in joint ventures or partnerships with homebuilders to maximize efficiency and profitability. Factors contributing to Forestar's earnings include the demand for new housing, land acquisition and development costs, and the overall health of the real estate market.
Forestar Group Earnings Call Summary
Earnings Call Date:Apr 17, 2025
(Q2-2025)
| % Change Since: 5.83%|
Next Earnings Date:Jul 22, 2025
Earnings Call Sentiment Neutral
The earnings call reflects a mixed performance with several positive aspects such as increased revenue, expanded market presence, and strong liquidity. However, these are offset by challenges like decreased net income, lower profit margins, and increased SG&A expenses. The company faces headwinds in the homebuilding market due to affordability constraints and consumer confidence issues.Q2-2025 Updates
Positive Updates
Increased Revenue and Lot Sales
Forestar Group Inc. generated $351 million in revenue, a 5% increase from the prior year quarter. Lot sales increased by 4% from the previous year and 46% sequentially, reaching 3,411 lots.
Strong Contracted Backlog
The company reported a 41% increase in lots under contract to sell, totaling 25,400 lots, which represents $2.3 billion of future revenue, marking the highest contracted backlog in the last four years.
Liquidity and Financial Strength
Forestar Group Inc. increased its liquidity position to approximately $800 million and extended its debt maturity profile through a refinancing transaction. The company ended the quarter with $792 million in liquidity and an 11% increase in book value per share.
Market Expansion
Forestar Group Inc. expanded into ten new markets and increased its community count by 21%, showing diversification and growth in its operations.
Negative Updates
Decline in Net Income and Profit Margins
Net income decreased to $31.6 million from $45 million in the prior year quarter. The gross profit margin dropped to 22.6% from 24.9% due to non-recurring high-margin items in the previous year.
Increased SG&A Expenses
SG&A expenses increased by 32% from the prior year quarter, primarily due to a 29% increase in employee count.
Challenges in Homebuilding Market
The spring selling season started slower than expected due to home affordability constraints and declining consumer confidence, affecting lot deliveries.
Lowered Guidance for Lot Deliveries
Guidance for fiscal 2025 was updated to deliver between 15,000 and 15,500 lots, a reduction from prior expectations.
Company Guidance
During Forestar Group Inc.'s second-quarter 2025 earnings call, the company provided updated guidance, expecting to deliver between 15,000 and 15,500 lots, generating $1.5 to $1.55 billion in revenue for fiscal 2025. Forestar reported $31.6 million in net income, or $0.62 per diluted share, with revenues increasing by 5% year-over-year to $351 million. The company sold 3,411 lots, a 4% year-over-year increase, and lots under contract rose 41% to 25,400, representing 37% of their owned lot position. The current backlog, valued at $2.3 billion, is the highest in four years. Forestar has strong liquidity of $800 million and a net debt to capital ratio of 29.8%, supported by a refinancing transaction extending their debt maturity profile. The company is focused on maintaining a minimum 15% pre-tax return on inventory and expects to invest approximately $1.9 billion in land acquisition and development in fiscal 2025. Despite headwinds from home affordability constraints, Forestar aims to expand market share and maintain stable gross margins between 21% and 23%.Forestar Group Financial Statement Overview
Summary
Forestar Group demonstrates strong financial stability with impressive margins and a debt-free balance sheet. However, challenges in revenue growth and negative cash flow affect the overall financial performance.Income Statement
Forestar Group demonstrates robust financial performance with a strong gross profit margin of 41.5% and a notable EBIT margin of 32.2% in the TTM. While revenue decreased by 2.5% compared to the previous period, the company maintains healthy profitability with a net profit margin of 11.4%. The decline in revenue is a concern, but the margins suggest efficient cost control and operational effectiveness.78
Positive
Balance Sheet
The balance sheet shows a strong financial position with zero total debt, resulting in an exceptional debt-to-equity ratio of 0. The equity ratio stands at 54.1%, reflecting a solid capital structure. The return on equity is 10.2%, indicating efficient use of equity to generate profits. The company's low leverage reduces financial risk and enhances stability.85
Very Positive
Cash Flow
The cash flow statement highlights challenges with negative free cash flow growth and an operating cash flow to net income ratio of -2.45. Despite these challenges, the company shows resilience with a positive free cash flow to net income ratio of -2.46, indicating potential for future improvement. The significant negative operating cash flow requires careful management to ensure liquidity.60
Neutral
| Breakdown | TTM | Sep 2024 | Sep 2023 | Sep 2022 | Sep 2021 | Sep 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 1.47B | 1.51B | 1.44B | 1.52B | 1.33B | 931.80M |
| Gross Profit | 338.30M | 359.30M | 304.10M | 324.00M | 229.20M | 118.10M |
| EBITDA | 206.20M | 247.90M | 209.40M | 233.10M | 163.50M | 77.30M |
| Net Income | 168.40M | 203.40M | 166.90M | 178.80M | 110.20M | 60.80M |
Balance Sheet | ||||||
| Total Assets | 3.04B | 2.84B | 2.47B | 2.34B | 2.10B | 1.74B |
| Cash, Cash Equivalents and Short-Term Investments | 174.30M | 481.20M | 616.00M | 264.80M | 153.60M | 394.30M |
| Total Debt | 881.30M | 716.60M | 695.00M | 706.00M | 704.50M | 641.10M |
| Total Liabilities | 1.40B | 1.25B | 1.10B | 1.14B | 1.09B | 868.10M |
| Stockholders Equity | 1.65B | 1.59B | 1.37B | 1.20B | 1.01B | 870.90M |
Cash Flow | ||||||
| Free Cash Flow | -413.70M | -160.60M | 362.80M | 105.20M | -304.70M | -169.00M |
| Operating Cash Flow | -412.30M | -158.40M | 364.10M | 108.70M | -303.10M | -168.40M |
| Investing Cash Flow | 8.30M | 7.30M | 300.00K | 1.30M | 1.00M | 5.00M |
| Financing Cash Flow | 162.10M | 16.30M | -13.20M | 1.20M | 61.40M | 174.90M |
Forestar Group Technical Analysis
Positive
20.15
Price Trends
19.66
Positive
20.75
Negative
24.99
Negative
Market Momentum
0.06
Negative
54.08
Neutral
51.74
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FOR, the sentiment is Positive. The current price of 20.15 is above the 20-day moving average (MA) of 19.82, above the 50-day MA of 19.66, and below the 200-day MA of 24.99, indicating a neutral trend. The MACD of 0.06 indicates Negative momentum. The RSI at 54.08 is Neutral, neither overbought nor oversold. The STOCH value of 51.74 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for FOR.
Forestar Group Risk Analysis
Forestar Group disclosed 27 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
Overall Rating
UnderperformOutperform
Sector (63)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | $599.10M | 4.47 | 12.27% | ― | 11.66% | 78.44% | |
72 Outperform | $1.02B | 6.11 | 10.81% | ― | -5.60% | -17.86% | |
63 Neutral | $6.87B | 19.10 | -1.13% | 7.17% | 4.72% | -24.75% | |
61 Neutral | $411.79M | 42.30 | 1.50% | ― | 24.15% | -60.70% | |
55 Neutral | $232.75M | ― | -2.20% | ― | -6.48% | -592.10% |
* Real Estate Sector Average
Performance Comparison
FOR
Forestar Group
20.15
-11.27
-35.87%
ARL
American Realty Investors
14.41
0.41
2.93%
FPH
Five Point Holdings
5.56
2.63
89.76%
LSEA
Landsea Homes
11.31
2.50
28.38%
Forestar Group Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
Forestar Group Expands Board with CEO Appointment
Positive
Apr 15, 2025
On April 14, 2025, Forestar Group announced the appointment of Anthony W. Oxley, its President and CEO, as a director on the Board, expanding it from six to seven members. This strategic move is expected to enhance the company’s leadership, leveraging Mr. Oxley’s extensive experience in business development and land management to strengthen Forestar’s market position.
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.