Reviewing M.D.C. (MDC) & AV Homes (AVHI)

M.D.C. (NYSE: MDC) and AV Homes (NASDAQ:AVHI) are both small-cap construction companies, but which is the superior investment? We will contrast the two businesses based on the strength of their analyst recommendations, dividends, profitability, earnings, institutional ownership, valuation and risk.

Volatility and Risk

M.D.C. has a beta of 1.49, indicating that its stock price is 49% more volatile than the S&P 500. Comparatively, AV Homes has a beta of 0.54, indicating that its stock price is 46% less volatile than the S&P 500.

Profitability

This table compares M.D.C. and AV Homes’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
M.D.C. 6.04% 11.99% 6.28%
AV Homes -3.18% 1.73% 0.72%

Dividends

M.D.C. pays an annual dividend of $1.20 per share and has a dividend yield of 3.8%. AV Homes does not pay a dividend. M.D.C. pays out 46.5% of its earnings in the form of a dividend. M.D.C. has increased its dividend for 6 consecutive years.

Institutional and Insider Ownership

79.8% of M.D.C. shares are owned by institutional investors. Comparatively, 86.4% of AV Homes shares are owned by institutional investors. 27.0% of M.D.C. shares are owned by insiders. Comparatively, 7.7% of AV Homes shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares M.D.C. and AV Homes’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
M.D.C. $2.58 billion 0.69 $141.83 million $2.58 12.25
AV Homes $843.25 million 0.57 -$21.93 million $0.74 28.99

M.D.C. has higher revenue and earnings than AV Homes. M.D.C. is trading at a lower price-to-earnings ratio than AV Homes, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent ratings and price targets for M.D.C. and AV Homes, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
M.D.C. 1 5 3 0 2.22
AV Homes 0 1 0 0 2.00

M.D.C. currently has a consensus target price of $33.57, suggesting a potential upside of 6.24%. Given M.D.C.’s stronger consensus rating and higher possible upside, equities research analysts plainly believe M.D.C. is more favorable than AV Homes.

Summary

M.D.C. beats AV Homes on 14 of the 17 factors compared between the two stocks.

M.D.C. Company Profile

M.D.C. Holdings, Inc., through its subsidiaries, engages in the homebuilding and financial service businesses. Its homebuilding operations include purchasing finished lots or developing lots for the construction and sale primarily of single-family detached homes to first-time and first-time move-up homebuyers under the Richmond American Homes name. The company conducts its homebuilding operations in Arizona, California, Nevada, Washington, Colorado, Utah, Virginia, Florida, Maryland, Pennsylvania, and New Jersey. Its financial services operations consist of originating mortgage loans primarily for homebuyers; providing insurance coverage primarily to its homebuilding subsidiaries and subcontractors for homes sold by its homebuilding subsidiaries, and for work performed in completed subdivisions; acting as a re-insurer on the claims; selling third-party personal property and casualty insurance products to homebuyers; and offering title agency services to homebuilding subsidiaries and customers in Colorado, Florida, Maryland, Nevada, and Virginia. M.D.C. Holdings, Inc. was founded in 1972 and is based in Denver, Colorado.

AV Homes Company Profile

AV Homes, Inc. engages in the homebuilding and community development businesses in Florida, the Carolinas, Arizona, and Texas markets. The company is involved in the acquisition, development, and building of active adult communities, which are age-restricted to the age 55 and over active adult demographic; and primary residential home communities under local Savvy Homes, Bonterra Builders, Royal Oak Homes, and Oakdale-Hampton brands for first-time and move-up buyers. It also engages in the construction and sale of residences within the communities. In addition, the company is involved in other real estate activities, such as the operation of amenities; and the sale of land for third-party development. As of December 31, 2017, it owned 4,911 developed residential lots; 2,395 partially developed residential lots; 8,776 undeveloped residential lots; and 6,980 acres of mixed-use, commercial, and industrial land. The company was formerly known as Avatar Holdings Inc. and changed its name to AV Homes, Inc. in February 2012. AV Homes, Inc. was founded in 1970 and is headquartered in Scottsdale, Arizona.

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