It is relatively small compared with its peers. In 2014, it was the 11th largest in the industry based on revenues of $1.7 billion and 12th largest when measured by the number of homes delivered.
Despite a slowdown in its construction levels recently, analysts at Capital IQ believe the company is positioned to benefit from the continued housing recovery. They note its ability to control costs, strong balance sheet and well-placed markets put it in a position to increase revenues and earnings. For 2015, they estimate earnings will increase 25% to $1.61 per share, and then rise another 13% in 2016 to $1.82.
Technically, MDC stock broke from a saucer consolidation that took nine months to form. The breakout was preceded by several strong buy signals from my proprietary indicator, the Collins-Bollinger Reversal (CBR), before smashing through the resistance (now support) at $29.
Shares are currently consolidating in a short-term bullish flag and should break to a new 52-week high within days.
The MACD indicator is on a minor sell signal, but that should be ignored in light of current overall market volatility.
Buy MDC stock at $30.50 for a trade to $35, which would result in a 15% return. Investors should also consider this stock for participation in the home construction industry since its long-term target is estimated to be in the $40s. In addition to its appreciation potential, the company pays an annual dividend of $1 for a current yield of 3.3%.
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