Forestar Group (FOR) AI Stock Analysis

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Forestar Group

(NYSE:FOR)

Rating:70Outperform

Price Target:

$22.00

▲(12.36%Upside)

Forestar Group's strong financial foundation and attractive valuation are offset by technical bearishness and cash flow challenges. While the earnings call highlights robust guidance and market expansion, profitability pressures remain a concern. The strengthened board is a positive development, but operational and market challenges need addressing for improved stock performance.

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

$970.73M

Dividend YieldN/A

Average Volume (3M)177.94K

Price to Earnings (P/E)6.0

Beta (1Y)0.87

Revenue Growth-5.60%

EPS Growth-17.86%

CountryUS

Employees440

SectorReal Estate

Sector Strength63

IndustryReal Estate - Development

Share Statistics

EPS (TTM)0.62

Shares Outstanding50,823,800

10 Day Avg. Volume148,708

30 Day Avg. Volume177,940

Financial Highlights & Ratios

PEG Ratio-0.76

Price to Book (P/B)0.61

Price to Sales (P/S)0.00

P/FCF Ratio-2.42

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$29.00

Price Target Upside48.11% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering1

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 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: 2.84%|

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 profitability with high margins and a debt-free balance sheet, enhancing financial stability. However, challenges in revenue growth and negative cash flow highlight potential risks to future financial flexibility.

Income Statement

Positive

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.

Balance Sheet

Very Positive

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.

Cash Flow

Neutral

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.

TTM	Sep 2024	Sep 2023	Sep 2022	Sep 2021	Sep 2020
Breakdown
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
	EBIT
203.50M	244.90M	204.80M	230.40M	160.80M	72.40M
	EBITDA
206.20M	247.90M	209.40M	233.10M	163.50M	77.30M
	Net Income Common Stockholders
168.40M	203.40M	166.90M	178.80M	110.20M	60.80M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
132.00M	481.20M	616.00M	264.80M	153.60M	394.30M
	Total Assets
2.96B	2.84B	2.47B	2.34B	2.10B	1.74B
	Total Debt
816.30M	716.60M	695.00M	706.00M	704.50M	641.10M
	Net Debt
-132.00M	235.40M	79.00M	441.20M	550.90M	246.80M
	Total Liabilities
1.35B	1.25B	1.10B	1.14B	1.09B	868.10M
	Stockholders Equity
1.61B	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

Technical Analysis Sentiment

Neutral

Last Price19.58

Price Trends

50DMA

19.88

Negative

100DMA

21.54

Negative

200DMA

25.82

Negative

Market Momentum

MACD

-0.16

Negative

RSI

49.35

Neutral

STOCH

68.55

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For FOR, the sentiment is Neutral. The current price of 19.58 is below the 20-day moving average (MA) of 19.64, below the 50-day MA of 19.88, and below the 200-day MA of 25.82, indicating a bearish trend. The MACD of -0.16 indicates Negative momentum. The RSI at 49.35 is Neutral, neither overbought nor oversold. The STOCH value of 68.55 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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 (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
FPH	74 Outperform	$585.10M	4.37	12.27%	―	11.66%	78.44%
FOR	70 Outperform	$970.73M	6.00	10.81%	―	-5.60%	-17.86%
LSEA	70 Outperform	$409.61M	42.15	1.50%	―	24.15%	-60.70%
Sector *	61 Neutral	$2.81B	10.77	0.40%	8439.00%	5.73%	-20.81%
ARL	54 Neutral	$233.24M	―	-2.20%	―	-6.48%	-592.10%
OZ		$246.29M	―	-9.30%	―	―	―
MRNO		$838.01M	114.80		―	―	―

* Real Estate Sector Average

Performance Comparison

FOR

Forestar Group

19.58

-12.89

-39.70%

ARL

American Realty Investors

14.87

0.77

5.46%

FPH

Five Point Holdings

5.68

2.61

85.02%

LSEA

Landsea Homes

11.27

1.30

13.04%

Belpointe PREP

65.01

6.61

11.32%

MRNO

Murano Global Investments

9.50

-0.10

-1.04%

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.

Private Placements and Financing

Forestar Group Completes $500 Million Senior Notes Offering

Neutral

Mar 14, 2025

On March 14, 2025, Forestar Group Inc. completed a $500 million offering of 6.500% Senior Notes due 2033 in a private placement. These notes are senior unsecured obligations and are guaranteed by the company’s restricted subsidiaries. The proceeds from this offering were used to purchase $329,434,000 of the company’s outstanding 3.850% Senior Notes due 2026, which were tendered in a previously announced cash tender offer.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

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.