Wachovia Initiates NVR Inc. (NVR) with an Outperform
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Wachovia initiates coverage on NVR Inc. (NYSE: NVR) with an Outperform rating and a $675-$700 valuation range.
Wachovia believes that long term investors should be focused on NVR despite a struggling housing market, which the firm continues to view unfavorably. The firm also highlighted that NVR is trading at a 49% discount to its historical price-to-book ratio.
The firm said, "NVR's business model is our favorite in our coverage universe, and currently its only profitable one. We believe NVR is a low-cost home producer leveraging its novel manufacturing/distribution facilities, option-only land strategy, and greater overall local market share. Critically, in an environment of hyper-competition among large builders, we do not believe peers can either replicate NVR's model, nor compete consistently and effectively with it. NVR should continue to achieve high margins and industry-leading returns while maintaining the best balance sheet, the most consistent cash flow generation, and lowest risk profile among publicly traded homebuilders. If NVR’s key, Washington, D.C. market, one of the first to falter, should show signs of recovery, or if the company takes advantage of its highly liquid, under-leveraged balance sheet to repurchase stock, shares could move into our valuation range rapidly."
NVR, Inc. operates as a homebuilder in the United States.
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