Smith Douglas Homes Corp. Class A (SDHC) AI Stock Analysis

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Smith Douglas Homes Corp. Class A

(NYSE:SDHC)

65Neutral

Smith Douglas Homes Corp. has demonstrated strong financial performance with robust profit margins and improved leverage ratios. However, a significant drop in revenue and cash flow poses potential risks. The company's stock is currently in a bearish technical trend, but it is reasonably valued with a favorable P/E ratio. Despite challenges in margins and macroeconomic factors, the earnings call provided a positive outlook with strong operational achievements and strategic growth plans.

Positive Factors

Earnings

SDHC reported 3Q24 earnings ahead of forecast, driven by higher deliveries and lower SG&A.

Guidance

SDHC raised full year 2024 guidance to 2.78k-2.83k deliveries and announced 4Q24 closings guidance above initial expectations.

Negative Factors

Backlog

The backlog at year-end was at 694, down 24% year-over-year, reflecting a shrinking backlog trend in the industry.

Cost Inflation

Smith Douglas Homes faces headwinds from cost inflation while net price remains under pressure from higher mortgage rates.

Smith Douglas Homes Corp. Class A (SDHC) vs. S&P 500 (SPY)

Market Cap

$869.09M

Dividend YieldN/A

Average Volume (3M)73.89K

Price to Earnings (P/E)10.4

Beta (1Y)0.92

Revenue Growth27.57%

EPS Growth-24.37%

CountryUS

Employees445

SectorGeneral

Sector StrengthN/A

IndustryReal Estate - Development

Share Statistics

EPS (TTM)1.81

Shares Outstanding8,991,378

10 Day Avg. Volume63,251

30 Day Avg. Volume73,889

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)1.55

Price to Cash Flow (P/CF)11.60

P/FCF Ratio11.90

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$20.75

Price Target Upside9.90% Upside

Rating ConsensusHold

Number of Analyst Covering4

Smith Douglas Homes Corp. Class A Business Overview & Revenue Model

Company DescriptionSmith Douglas Homes Corp. Class A (SDHC) is a homebuilding company that focuses on constructing affordable homes for families and individuals. Operating primarily in the southeastern United States, the company aims to deliver quality homes with efficient designs and construction processes. Its core services include land acquisition, development, and home construction, catering to first-time homebuyers and those looking for value in their housing investments.

How the Company Makes MoneySmith Douglas Homes Corp. makes money primarily through the sale of residential properties. The company generates revenue by acquiring land, developing it into residential communities, and constructing homes that are sold to customers. Key revenue streams include the sale of completed homes and, to a lesser extent, land development projects. The company's earnings are influenced by housing market conditions, customer demand, and efficient cost management during the construction process. Partnerships with suppliers for materials and regional real estate agents also play a significant role in driving sales and managing costs.

Smith Douglas Homes Corp. Class A Financial Statement Overview

Summary

Smith Douglas Homes Corp. Class A shows strong profit margins and improved leverage ratios, indicating operational efficiency and reduced financial risk. However, the substantial drop in revenue and cash flows from 2023 to 2024 is concerning and suggests potential challenges in the market or operational strategy. The company must focus on revenue growth strategies to complement its strong profitability and leverage position.

Income Statement

Neutral

The company's revenue has declined significantly from 2023 to 2024, dropping by over 66%. Despite this, the gross profit margin remains robust at 100% in 2024, suggesting effective cost management. However, the net profit margin dropped from 16% to approximately 44%, indicating increased profitability relative to the reduced revenue. The EBIT and EBITDA margins improved, reflecting efficient operations. Overall, while the margins are strong, the sharp revenue decline is a concern.

Balance Sheet

Positive

The company's debt-to-equity ratio improved significantly from 0.37 in 2023 to 0.04 in 2024, indicating a much lower reliance on debt. The equity ratio also improved from 0.59 to 0.15, showing a stronger equity position. However, the absolute decrease in stockholders' equity is a notable concern. Overall, the balance sheet demonstrates improved leverage and equity stability, but the reduction in total equity warrants attention.

Cash Flow

Positive

The operating cash flow has decreased from 2023 to 2024, but the company still maintains a positive free cash flow. The free cash flow to net income ratio improved, suggesting better cash conversion efficiency. However, the overall decrease in cash flows needs to be monitored. The cash flow management appears stable, with effective capital expenditure control, but reduced cash generation is a potential risk.

Dec 2024	Dec 2023	Dec 2022	Dec 2021
Breakdown
Income Statement		Total Revenue
255.54M	764.63M	755.35M	518.86M
	Gross Profit
255.54M	216.33M	222.75M	122.95M
	EBIT
119.16M	123.89M	139.49M	58.72M
	EBITDA
121.21M	124.97M	140.35M	65.72M
	Net Income Common Stockholders
16.07M	123.18M	140.44M	62.53M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
22.36M	19.78M	29.60M	25.34M
	Total Assets
475.90M	352.69M	223.37M	201.19M
	Total Debt
12.07M	78.40M	18.39M	74.41M
	Net Debt
-10.29M	58.63M	-11.21M	49.07M
	Total Liabilities
74.17M	143.79M	58.86M	105.67M
	Stockholders Equity
73.63M	208.90M	164.51M	95.52M
Cash Flow		Free Cash Flow
15.24M	74.95M	131.09M	30.14M
	Operating Cash Flow
19.13M	76.26M	132.09M	30.87M
	Investing Cash Flow
-4.71M	-76.83M	361.00K	847.00K
	Financing Cash Flow
-11.84M	-9.25M	-128.19M	-38.54M

Smith Douglas Homes Corp. Class A Technical Analysis

Technical Analysis Sentiment

Negative

Last Price18.88

Price Trends

50DMA

20.69

Negative

100DMA

24.22

Negative

200DMA

28.74

Negative

Market Momentum

MACD

-0.69

Negative

RSI

41.50

Neutral

STOCH

42.12

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For SDHC, the sentiment is Negative. The current price of 18.88 is below the 20-day moving average (MA) of 19.12, below the 50-day MA of 20.69, and below the 200-day MA of 28.74, indicating a bearish trend. The MACD of -0.69 indicates Negative momentum. The RSI at 41.50 is Neutral, neither overbought nor oversold. The STOCH value of 42.12 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for SDHC.

Smith Douglas Homes Corp. Class A Risk Analysis

Smith Douglas Homes Corp. Class A disclosed 83 risk factors in its most recent earnings report. Smith Douglas Homes Corp. Class A 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

Smith Douglas Homes Corp. Class A Peers Comparison

Overall Rating

UnderperformOutperform

Sector (55)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
DHI	76 Outperform	$37.75B	8.46	17.83%	1.15%	-4.71%	-10.19%
TOL	75 Outperform	$9.34B	6.46	20.38%	0.98%	5.86%	12.20%
PHM	74 Outperform	$19.14B	6.46	27.40%	0.88%	11.74%	25.66%
LEN	67 Neutral	$27.47B	7.63	14.97%	1.91%	2.03%	-3.80%
SDHC	65 Neutral	$869.09M	10.43	11.38%	―	27.57%	-24.37%
KBH	63 Neutral	$3.71B	6.30	15.58%	1.93%	5.54%	11.12%
Sector *	55 Neutral	$3.80B	-11.38	-15.29%	5.24%	19.55%	-44.95%

* General Sector Average

Performance Comparison

SDHC

Smith Douglas Homes Corp. Class A

18.26

-7.69

-29.63%

DHI

DR Horton

120.76

-21.01

-14.82%

KBH

KB Home

51.07

-10.76

-17.40%

LEN

Lennar

103.71

-40.02

-27.84%

PHM

PulteGroup

93.11

-13.95

-13.03%

TOL

Toll Brothers

92.13

-20.76

-18.39%

Smith Douglas Homes Corp. Class A Earnings Call Summary

Earnings Call Date: Mar 12, 2025 | % Change Since: -10.65% | Next Earnings Date: May 20, 2025

Earnings Call Sentiment Neutral

Smith Douglas Homes showed significant growth in revenue and home deliveries, benefiting from efficient cycle times and strategic land management. However, challenges such as declining margins due to increased lot costs and incentives, along with macroeconomic uncertainties like interest rates and affordability, present notable risks. Despite the positive growth metrics, these challenges balance the sentiment.

Highlights

Record Pre-Tax Income and Home Deliveries

Smith Douglas Homes reported pre-tax income of $30 million for Q4 2024, contributing to a total of $117 million for the year. The company delivered 836 homes in Q4, setting a quarterly record, with 2,867 homes delivered for the full year.

Strong Revenue Growth

Q4 2024 revenue was $287 million, a 32% increase over the previous year. Full-year 2024 revenue was $975 million, marking a 28% increase from 2023.

Operational Efficiency and Land Strategy Success

The company achieved a 55-day cycle time and maintained a 'land-light' strategy with 96% of controlled lots via auction agreements, contributing to a 29% adjusted return on equity.

Expansion in Community Count

Smith Douglas Homes increased its active selling communities from 69 at the end of 2023 to 78 by the end of 2024.

Lowlights

Margin Pressure Due to Incentives and Lot Costs

Gross margins decreased from 28.3% in 2023 to 26.2% in 2024, primarily due to increased lot costs and the use of price incentives, which were 3.6% of revenue compared to 3.4% last year.

Interest Rate and Affordability Challenges

There were headwinds due to interest rates exceeding 7%, affecting affordability and contributing to slower sales in January 2025 before a pickup in February.

SG&A Expenses and Bonus Accruals

SG&A expenses were 14.9% of revenue in Q4, attributed to overachievement and additional bonus accruals, impacting the overall cost structure.

Macroeconomic Uncertainty Impacting Outlook

Uncertainties around tariffs, inflation, and interest rates pose risks to maintaining sales pace and margins.

Company Guidance

During the Smith Douglas Homes fourth quarter 2025 earnings call, the company provided several key metrics and insights into their performance and future outlook. For the fourth quarter of 2024, Smith Douglas Homes reported a pre-tax income of $30 million and delivered 836 homes, surpassing their guidance range and setting a quarterly record. The full year saw 2,867 homes delivered, generating $975 million in revenue with a gross margin of 26.2%. The company achieved an adjusted return on equity of 29% for 2024. Despite challenges from macroeconomic factors like interest rate hikes and affordability issues, the company remains optimistic about 2025, projecting home closings between 3,000 and 3,200 with an average sales price of $330,000 to $335,000. Gross margins are expected to range between 23.25% and 23.75% in the first quarter. Smith Douglas Homes ended the year with 19,522 controlled lots, maintaining a land-light strategy with 96% controlled via auction agreements. The company plans to continue expanding its presence in the Southeast, leveraging its operational efficiency and manufacturing approach to home building.

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.