Looking for reliable companies to invest in? This blog presents a data-driven valuation of D.R. Horton (NYSE: DHI), one of the most compelling long term investment stocks. Using a scenario based Discounted Cash Flow (DCF) model covering Bear, Base, and Bull cases—the analysis uncovers DHI as a potentially undervalued stock. We also evaluate the sustainability of its dividend using free cash flow projections, making this a must-read for anyone investing in shares or building a portfolio of stable stock shares.
All figures are in millions of USD unless otherwise stated.
I. DCF Valuation — Bear Case
- EBITDA Growth Rate: 2%
- Terminal Growth Rate: 1.5%
- Discount Rate: 9%
- Sum of PV of UFCF (2024–2029): $16,703
- Terminal Value (TV): $60,511
- PV of Terminal Value: $39,328
- Enterprise Value (EV): $56,030
- Net Debt: $4,099
- Equity Value: $51,931
- Shares Outstanding: 315M
- Intrinsic Value per Share: $164.99
II. DCF Valuation — Base Case
- EBITDA Growth Rate: 4%
- Terminal Growth Rate: 2.5%
- Discount Rate: 7.5%
- Sum of PV of UFCF (2024–2029): $18,424
- Terminal Value (TV): $101,299
- PV of Terminal Value: $70,561
- Enterprise Value (EV): $88,985
- Net Debt: $4,099
- Equity Value: $84,886
- Shares Outstanding: 315M
- Intrinsic Value per Share: $269.69
III. DCF Valuation — Bull Case
- EBITDA Growth Rate: 6%
- Terminal Growth Rate: 3.5%
- Discount Rate: 6.5%
- Sum of PV of UFCF (2024–2029): $20,071
- Terminal Value (TV): $187,996
- PV of Terminal Value: $137,215
- Enterprise Value (EV): $157,285
- Net Debt: $4,099
- Equity Value: $153,186
- Shares Outstanding: 315M
- Intrinsic Value per Share: $486.69
IV. Valuation Summary and Upside Potential
- Current Price: $124.20
- Bear Case Intrinsic Value: $164.99 → 33% upside
- Base Case Intrinsic Value: $269.69 → 117% upside
- Bull Case Intrinsic Value: $486.69 → 292% upside
V. Dividend Sustainability Analysis
- Dividend per Share: $1.40
- Shares Outstanding: 315M
- Total Dividends Paid: 315 × 1.40 = $441M
- Free Cash Flow (Used for Analysis): $2,729M
- Dividend Payout Ratio (FCF Basis):
- $441 / $2,729 = 0.161 or ~16.1%
- Assessment:
- Payout ratio is very low, indicating substantial buffer
- The company retains 84%+ of FCF post dividends, signaling high flexibility
- Conclusion: Dividend appears very sustainable, with strong headroom for growth or reinvestment
VI. Summary View
This report avoids narrative and remains grounded in a quantitative, scenario-driven framework. Each case reflects a different assumption set for growth, risk, and capital structure, offering a robust view of valuation bands.
- DCF Highlights: DHI trades below its modeled fair value under all three cases
- Dividend View: Strong and secure, with a 16% payout ratio
- Quantitative Takeaway: At $124.20, DHI’s market price reflects pessimism not supported by intrinsic forecasts
Valuation Range: $164.99 – $486.69
EOG Resources: One of the Hottest Value Stocks? DCF Valuation Suggests Upside (2025)
