Ryland Group (RYL, Financial) closed the fiscal year 2014 on a positive notes. Significant growth in new community openings, better unit closings and accelerated average selling prices for homes during the fourth-quarter increased its revenue by 25% over the same period in 2013. Its gross profit margins improved by 40 bps leading to 210 bps growth in homebuilding pre-tax margins. These improving trends suggest better growth momentum for Ryland Group in 2015.
Why the company will improve
Ryland Group remains focused to drive its performance on the back of improving macro levels, favorable demographics, an improving economy and better employment pictures. The company expects these positive atmospheres to create better demand for new homes going forward.
Moreover, its backlog value for homes has increased 7% to $919 million for 2167 homes. This is solid future revenue for Ryland Group. It has better conversion rate for its backlog homes. It has more than 70% of conversion rates for its backlog homes with better prices. The average selling price for its backlog homes have increased 13% to $351,000 a home. This should generate better revenue for Ryland in fiscal 2015.
In fact, the company has recently announced new homes sales for its latest waterfront community, Isles of Lake Hancock. This homes offer a variety of six floor plans that ranges from 2,651 to 4,820 square feet. Moreover, these homes have been priced in the range of $500,000 to $1 million. This should increase its profitability this year.
In addition, the company anticipates community count growth of approximately 10% in fiscal year 2015. This is significant growth for its already expanding community counts. Ryland has about 205 communities under construction. The company expects these communities to soon come online; that will further supplement its growth and enhance its top as well as bottom line performance.
Furthermore, the company is constantly making investments in land and land development. It has spent nearly $538 million in land and approximately $375 million in land development projects. This year it plans to spend about $900 million in land and land development aspects.
Conclusion
Ryland Group is making significant efforts to expand its gross margins and reduce its expenses. These pains should deliver better returns to its shareholders in fiscal 2015. The analysts expect its earnings to grow 15.20% for next two years. This suggests remarkable growth prospects for its shareholders in the short-run.
Moreover, the stock shares cheap valuation. It trades at the forward P/E of 11.93, which is below the trailing P/E of 15.83. This signifies that the stock has a lot of potential to grow in the future. It has profit and operating profit margins of 6.72% and 10.73% respectively for the past twelve months. Its balance sheet carries total cash of $548.47 million and has total debt of $1.53 billion.
