Its Ryan Homes brand was founded in 1948 in Pittsburgh, Pennsylvania; it has constructed more than 440,000 homes and markets primarily to first-time buyers.
The NVHomes brand offers additional architectural details and has earned a reputation for both quality and value. Heartland Homes builds primarily luxury homes in the Pittsburgh metropolitan area.
Housing is primarily constructed on a pre-sold basis. NVR’s lot acquisition strategy is predicated upon reducing risk associated with direct land ownership and development. The company typically acquires finished building lots from third party land developers pursuant to fixed price finished lot purchase agreements.
During the first quarter, NVR generated $325 million in free cash flow, representing over 130% of net income. NVR’s robust free cash flow allows it to fund growth while returning cash to shareholders.
Though NVR does not currently pay a dividend nor does it have plans to do so, it has historically returned a substantial portion of excess cash to shareholders via share buybacks.
Over the past five years, NVR has repurchased nearly $3 billion of its shares. During the past quarter, NVR repurchased about 86 million shares of its common stock for $377.4 million or at an average price of $4,362 per share.
The company ended the first quarter with $2.8 billion in cash, $1.5 billion in long-term debt and $3.0 billion in shareholders’ equity on its sturdy balance sheet.
NVR has generated solid growth over the past five years with revenue compounding at a 7% annual rate and net income and earnings growing at 21% and 22% annual rates, respectively.
Strong demand for new homes continued through the first quarter of 2021, driven by historically low mortgage interest rates and low housing supply. This has led to strong sales absorptions and rising home prices, as well as increased construction activity and demand for building materials.
For the first quarter, NVR reported a 29% jump in revenues to over $2 billion with net income and EPS each rising more than 40% to $249 million and $63.21, respectively.
New orders increased in the first quarter by 26% to 6,314 units with the average sales price rising 10% to $410,500. The backlog of homes sold but not settled as of 3/31/21 increased by 42% to 12,791 units and increased on a dollar basis by 51% to $5.2 billion.
Long-term investors seeking a firm with a strong foundation should consider NVR, a high-quality market leader with strong brands, robust cash flow and profitable growth. Buy.