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Investor Survey (help)
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Threat: Credit Market Crisis (1) "Buy" Indicators (help) Insider Buying (enter symbol) "Sell" Indicators (help) Insider Selling (enter symbol) Sponsors |
Centex Corporation, a home building company, engages in purchasing and developing land or lots, and constructing and selling detached and attached single-family homes and land or lots in the United States. The company markets its homes to first-time buyers under the Fox & Jacobs brand, as well as to first-time and move-up buyers under the Centex Homes brand; sells multi-family homes in urban areas under the City Homes brand; and markets homes to rural lot owners under the Wayne Homes brand, and to second home/resort homebuyers under the Centex Destination Properties brand. As of March 31, 2007, it operated in 79 market areas located in 25 states and the District of Columbia; and delivered approximately 35,785 homes, including first-time, move-up, and custom homes. Centex also engages in mortgage lending, provision of title agency services, and the sale of title insurance and other insurance products. The company was founded in 1950 and is based in Dallas, Texas
Discretionary Industry Analysis
WikiWealth.com Industry Description: the consumer discretionary industry refers to products and services bought with discretionary (normal expenses) income. The Consumer discretionary sector encompasses industries that tend to be the most sensitive to economic cycles and stock market swings. Its manufacturing segment includes automotive, household durable goods, textiles & apparel and leisure equipment. The services segment includes hotels, restaurants and other leisure facilities, media production and services and consumer retailing. Read More. Also see the Industry Analysis Home Page.
WikiWealth.com Industry Analysis: During economic recessions, consumers tend to cut back on discretionary expenses to save money during those tough economic times. Less spending by consumers eventually decreases business revenue and stock prices. During economic recoveries, consumers have more discretionary income, so spending quickly increases. Higher spending increases business revenue and eventually increases stock prices. During long economic expansions, discretionary income increase, but at a slower pace than during the initial economic recovery stage.
| Discretionary Financial Statistics | Stat | Notes |
|---|---|---|
| Stock Rating | Buy | … |
| Potential (safety margin) | 52% | High ~ Good for investors |
| WACC Analysis | 8% | Low ~ Good for investors |
| Enterprise Value Multiples | Stat | Notes |
| Revenue EV Multiple | 1.1x | … |
| EBITDA EV Multiple | 5.5x | Low ~ Good for investors |
| EBIT EV Multiple | 8.4x | Low ~ Good for investors |
| Cash Flow EV Multiple | 12x | Low ~ Good for investors |
| Book Value EV Multiple | 1.4x | … |
| Discounted Cash Flow | Stat | Notes |
| Revenue Growth | 10% | … |
| EBITDA Margin | 17% | … |
| EBIT Margin | 12% | … |
| Cash Flow Margin | 5% | … |
| Taxes Rate | 34% | … |
| Debt-Equity Ratio | 58% | High ~ Bad for investors |
| ROIC | 6% | … |
| Reinvestment Rate | 20% | High ~ Bad for investors |
| WACC Discount Rate | Stat | Notes |
| Risk Free Rate | 4% | Low ~ Good for Investors |
| Cost of Debt | 7% | Low ~ Good for Investors |
| Equity Risk Premium | 7% | … |
| Debt Required Return of Debt | 5% | Low ~ Good for Investors |
| Required Return of Equity | 9% | … |
1 Investment potential (margin of safety) is a weighted average of the discounted cash flow analysis (DCF), the enterprise value (EV) market multiple analysis, and the Warren Buffett investment analysis. WikiWealth obtains 80% of their quantitative investment potential from fundamental investment analysis.
2 The weighted average cost of capital (WACC) analysis for the industry is a broad representation of the WACC for each individual company. A sub-industry WACC analysis offers both stability and accuracy for each individual company.
WikiWealth.com Industry Profit Analysis: The best way to profit from discretionary stock investments is to find the most undervalued investments (Wall Street and Main Street buy ratings) during economic recessions. Those investments should be undervalued (see Wall Street Analysis on left side), and have high Main Street Common Sense investment ratings (see Main Street Analysis on right side). When an economic recovery occurs, discretionary stocks tend to outperform the general stock market, because consumers quickly resume spending on items they wanted, but resisted buying during tougher economic times. Eventually those investments become overvalued, because profits and stock prices increase past their fair values. In other words, the margin of safety becomes low or negative. During the last stages of an economic business cycle, just before a recession, it is best to sell discretionary stocks, because they are likely to decrease in price the fastest. Selling an stock investment is difficult do properly. Expensive (overvalued) stocks with low Main Street Common Sense ratings should be sold at any time to invest in better stocks. Two buys ratings are the best and two sell ratings are the worst possible stock investments. As a general rule, the larger the investment potential (margin of safety), the safer the investment. For more information on stock research ratings click here.
Investment Moats are fundamental investing theories developed by Warren Buffett and adapted to the SWOT analysis. Investment moats are general characteristics that separate great investments from average stock investments. The wider the investment moat the better. Read more: Investment Moats. For company-specific investment moats: SWOT Analysis.
SWOT Strengths Increase Investor Moats: Below is a list of relevant industry investment characteristics, if any exist
Economies of Scale (Votes:0) Economies of scale lower cost and increase services to customers. These advantages help shield…
Country Market Leader (Votes:0) A specific country or niche market leading position brings many benefits to those companies….
SWOT Weaknesses Decrease Investor Moats: Below is a list of relevant industry investment characteristics, if any exist
Low Barriers to Entry (Votes:0) Low barriers to entry mean that many competitors can easily move into the market. This…
Debt Level (Votes:0) High leverage could be dangerous in a declining market. Partially reflected in the beta…
Stock Price Triggers were developed by WikiWealth.com to predict changes in stock price direction, which depend on events outside of the control of the company. In general, if SWOT opportunities are greater than SWOT threats, the stock price should raise; the opposite is also true. For more precise measures, examine each SWOT opportunity and threat, then rank them according to importance and timing. The more important the investment characteristic, the greater the impact on stock direction. The sooner a investment trigger may occur, the more influence it will have on stock price direction. Read more: Stock Price Triggers. For company-specific stock price triggers: SWOT Analysis.
SWOT Opportunities are Positive Stock Price Triggers: Below is a list of relevant industry investment characteristics, if any exist.
Stimulus Package (Votes:0) The stimulus packages is expected to increase spending by consumers and the government. It also…
SWOT Threats are Negative Stock Price Triggers: Below is a list of relevant industry investment characteristics, if any exist.
Credit Market Crisis (Votes:1) The credit market crisis increases the cost of borrowing for financial firms. This increasing…
Housing Crisis (Votes:1) Housing crisis lowers the company's assets and equity and makes it harder to do business in the…
Mortgage Issues (Votes:0) The losses on outstanding mortgage obligations could force bankruptcy and a government…
Long Company Description (help)
Centex Corporation (NYSE: CTX) began trading publicly in 1969. Since the company’s founding in 1950 as a Dallas-based residential construction company, it has evolved into a company whose principal operations are focused on residential and commercial construction and related activities, including mortgage financing.
As of 2007, its subsidiary companies operated in the principal business segments of Home Building and Financial Services.
Home Building’s operations currently involve the purchase and development of land or lots and the construction and sale of detached and attached single-family homes (including resort and second home properties and lots) and land or lots. The company has participated in the homebuilding business since 1950 and, in 2005, is the 4th largest homebuilder in the U.S., based on the total number of closings.
Financial Services’ operations consist primarily of mortgage lending, title agency services, and the sale of title insurance and other insurance products. These activities include mortgage origination, servicing, and other related services for homes sold by its subsidiaries and others. The company has been in the mortgage lending business since 1973.
Prior to March 2007, Centex also operated in the commercial construction industry, having purchased a Dallas-based commercial contractor in 1966 (whose business dated back to 1936). Its operations involved the construction of buildings for both private and government interests, including educational institutions, hospitals, multi-unit residential buildings, correctional institutions, airport facilities, office buildings, hotels and resorts, and sports facilities. In March 2007, Centex sold its commercial construction operations to Balfour Beatty, a British-based construction company, in order to focus completely on the residential housing market.
As of April 2008, the HomeTeam Pest Defense division of Centex was purchased by Rollins Inc., a premier North American consumer and commercial services company. Centex sold HomeTeam Pest Defense to maintain focus on residential home construction market.
Awards & Recognition
FORTUNE 500
Centex ranks No. 177 on the FORTUNE 500® list of America’s largest corporations, ranked by revenue.
Source: FORTUNE online, May 5, 2008
NAMED BY FORTUNE MAGAZINE as "AMERICA’S MOST ADMIRED COMPANY" IN THE HOME BUILDING INDUSTRY
Centex has ranked among the top three builders on FORTUNE magazine's list of "America's Most Admired Companies" for nine straight years and is a leader in quality and customer satisfaction.
Source: FORTUNE online, March 5, 2007
Professional Builder magazine's Top 10 Home Builders
Centex has been ranked among the nation's top 10 home builders every year since the list's inception in 1968.
Divisions
- Centex Destination Properties
- Centex Homes
- Centex Insurance
- Centex Title
- CTX Mortgage
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