Re: Why are residential construction stocks so undervalued?
NVR has grown its earnings at a rate of over 50% per year for the past decade. People would have to buy considerably fewer houses in the future to warrant a 6.5 industry average P/E and I just don't think this is the case. People have to have a place to live and I don't think people will buy houses any differently in the next ten years as they did in the past ten years.
Looking at the fundamental data and economic characteristics of the company, it seems like a no brainer to me, but obviously Mr. Market thinks the exact opposite and I am very curious as to why.
This leads me back to my original question: how can these great companies that have grown their earnings so well and manufacture a product that serves a repetitive need (housing) be so incredibly cheap?
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