NVR has gotten torched over the last six months - since November 2024, its stock price has dropped 23.8% to $7,096 per share. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Is now the time to buy NVR, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is NVR Not Exciting?
Even with the cheaper entry price, we're cautious about NVR. Here are three reasons why we avoid NVR and a stock we'd rather own.
1. Weak Backlog Growth Points to Soft Demand
We can better understand Home Builders companies by analyzing their backlog. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into NVR’s future revenue streams.
NVR’s backlog came in at $4.84 billion in the latest quarter, and over the last two years, its year-on-year growth averaged 1.5%. This performance was underwhelming and suggests that increasing competition is causing challenges in winning new orders. 
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 NVR’s revenue to drop by 8.2%, a decrease from its 1.3% annualized growth for the past two years. This projection doesn't excite us and implies its products and services will see some demand headwinds.
3. Recent EPS Growth Below Our Standards
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
NVR’s weak 1.1% 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
NVR isn’t a terrible business, but it isn’t one of our picks. Following the recent decline, the stock trades at 14.7× forward P/E (or $7,096 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We're pretty confident there are superior stocks to buy right now. Let us point you toward a dominant Aerospace business that has perfected its M&A strategy.
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