Deutsche Bank Downgrades M.D.C. Holdings (MDC) to Hold
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Deutsche Bank downgraded M.D.C. Holdings (NYSE: MDC) from Buy to Hold with a price target of $27.00 (from $28.00). Analyst Nishu Sood noted subpar returns and said the housing cycle is maturing,
"MDC's most recent strategy shift to increase the emphasis on volumes relative to margins has been successful to the extent that the company's earnings outlook has stabilized. Balance sheet efficiency has also improved with some reduction in specs; however, even with these improvements incorporated into our forecasts, expected returns on equity remain subpar for MDC. Even with our above consensus projections, return on equity barely reaches double digits in our forecasts out to FY18. In other words, MDC does not generate positive economic returns in our forecasts. With the housing cycle maturing, we think this will limit returns on the stock and so downgrade to Hold," said Sood.
Shares of M.D.C. Holdings closed at $25.78 yesterday.
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