Taylor Morrison Home has been treading water for the past six months, recording a small loss of 1.6% while holding steady at $66.89. The stock also fell short of the S&P 500’s 6.2% gain during that period.
Is there a buying opportunity in Taylor Morrison Home, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Taylor Morrison Home Not Exciting?
We're sitting this one out for now. Here are three reasons we avoid TMHC and a stock we'd rather own.
1. Backlog Declines as Orders Drop
In addition to reported revenue, backlog is a useful data point for analyzing Home Builders companies. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into Taylor Morrison Home’s future revenue streams.
Taylor Morrison Home’s backlog came in at $1.86 billion in the latest quarter, and it averaged 33.6% year-on-year declines over the last two years. This performance was underwhelming and shows the company is not winning new orders. It also suggests there may be increasing competition or market saturation. 
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Taylor Morrison Home’s revenue to drop by 17.2%, a decrease from its 5.8% annualized growth for the past five years. This projection doesn't excite us and indicates its products and services will see some demand headwinds.
3. Recent EPS Growth Below Our Standards
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Taylor Morrison Home’s weak 3.8% annual EPS growth over the last two years aligns with its revenue trend. This tells us it maintained its per-share profitability as it expanded.
Final Judgment
Taylor Morrison Home isn’t a terrible business, but it isn’t one of our picks. With its shares lagging the market recently, the stock trades at 13× forward P/E (or $66.89 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at the Amazon and PayPal of Latin America.
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