Ticonderoga Upgrades Ryland Homes (RYL) to Buy; Profit Step-Change, Modest Valuation Combine for Opportunity
Tweet
Share
E-mailGet Alerts RYL Hot Sheet
Price: $40.83 --0%
Rating Summary:
11 Buy, 9 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
11 Buy, 9 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Join SI Premium – FREE
Ticonderoga upgraded Ryland Homes (NYSE: RYL) to Buy. PT $19.50.
Ticonderoga analyst says, "After avoiding these shares for an extended period of time, we are now upgrading the equity to Buy, due to a litany of positive reasons. Readers of our work know that we have, at times, been unrelenting in our assessment that this equity was too highly valued versus peers. This premium valuation was particularly troubling when combined with what we felt were weak orders flow, fewer communities and lagging profitability. Now though, we believe the story has been turned on its head, presenting an excellent purchase opportunity of a cheap equity. Throw in fundamentals that can now perform without a robust housing recovery and we believe investors will be well rewarded over the next year."
"RYL is finally overcoming its Achilles' Heel(s) - growth and costs. On the growth side, after a couple years of significant community contraction, RYL has aggressively spent to jump-start its community count. In 2011, we should see that play out with community growth of 23% and 27% in the 1H11, and 18% for the full year. This growth is one of the stronger in the industry. Further, RYL has the group’s easiest Orders comps the next two quarters, down 13% and 44%, respectively. Consequently, we believe the two factors combine to generate the group’s strongest Order growth, up 7% and 36%, respectively, in 1Q and 2Q. We expect that by year-end, 50% of communities will be new, up from 10% now. This move will also benefit the gross margin by 125 to 150 bps."
For more ratings news on Ryland Homes click here and for the rating history of Ryland Homes click here.
Shares of Ryland Homes closed at $16.09 yesterday.
Ticonderoga analyst says, "After avoiding these shares for an extended period of time, we are now upgrading the equity to Buy, due to a litany of positive reasons. Readers of our work know that we have, at times, been unrelenting in our assessment that this equity was too highly valued versus peers. This premium valuation was particularly troubling when combined with what we felt were weak orders flow, fewer communities and lagging profitability. Now though, we believe the story has been turned on its head, presenting an excellent purchase opportunity of a cheap equity. Throw in fundamentals that can now perform without a robust housing recovery and we believe investors will be well rewarded over the next year."
"RYL is finally overcoming its Achilles' Heel(s) - growth and costs. On the growth side, after a couple years of significant community contraction, RYL has aggressively spent to jump-start its community count. In 2011, we should see that play out with community growth of 23% and 27% in the 1H11, and 18% for the full year. This growth is one of the stronger in the industry. Further, RYL has the group’s easiest Orders comps the next two quarters, down 13% and 44%, respectively. Consequently, we believe the two factors combine to generate the group’s strongest Order growth, up 7% and 36%, respectively, in 1Q and 2Q. We expect that by year-end, 50% of communities will be new, up from 10% now. This move will also benefit the gross margin by 125 to 150 bps."
For more ratings news on Ryland Homes click here and for the rating history of Ryland Homes click here.
Shares of Ryland Homes closed at $16.09 yesterday.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Freedom Broker Upgrades Serve Robotics (SERV) to Buy
- TD Cowen Upgrades Northland Power Inc. (NPI:CN) (NPIFF) to Buy
- JPMorgan Upgrades Genting Singapore (GENS:SP) (GIGNY) to Neutral
Create E-mail Alert Related Categories
UpgradesSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
