CCS stock analysis, predictions, analyst ratings (Century Communities Inc)

Four days ago I posted a note about the addition of this stock to my portfolio. Below is the analysis.


Century Communities, Inc., together with its subsidiaries, engages in the design, development, construction, marketing, and sale of single-family attached and detached homes. It is also involved in the entitlement and development of the underlying land; and provision of mortgage, title, and insurance services to its home buyers. The company sells homes through its sales representatives, as well as through independent real estate brokers in 17 states in the United States. Century Communities, Inc. was founded in 2000 and is headquartered in Greenwood Village, Colorado.

CCS stock price recently finished full flag formation and broke through the resistance. The whole movement is due to the continuous growth in earnings for Century Communities Inc.



Here is a slide from Century Communities Inc Investor presentation that shows the growth in Revenue and Net Income over the past few years.

Source: https://s25.q4cdn.com/885823474/files/doc_presentations/CCS-Investor-Deck-October-10.29.2020.pdf

Also, Century Communities reported that their Net New Home Contracts increased 57% year-over-year to 3,204 homes which the best in the company's history.


Analysts are predicting that Century Communities Inc. will continue its growth in revenue and earnings in the next few years.

With the growth in revenues, CCS stock is expected to deliver $7.744 in EPS at the end of 2022.

CCS is a good value based on its PE Ratio already (10.1x) compared to the US Consumer Durables industry average (15.6x). However, even if we assume that investors will continue to hold the price for CCS stock at a PE of 10, the stock price should reach $77 by the mid-end of 2022. This would mean a 54% gain. However, if the market will decide to lift the price of CCS stock to 15 which is quite conservative for a company with such good growth, the price may go to as high as $116 which would mean 130% growth.

On another positive note, CCS (Century Communities Inc.) has been constantly beating estimates for EPS for the past 2-3 years. While we cannot expect the company to keep doing this again and again, even if it beats estimates from time to time its EPS growth might be even higher than estimates.


Source: https://www.zacks.com/stock/chart/CCS/price-consensus-chart



Analyst ratings and predictions for CCS stock


Zacks has a Buy rating for CCS stock with A scores across all of their indicators. In addition, there are 4 analyst ratings for CCS stock. 3 of them have a "BUY" rating, while 1 has a "HOLD" rating. The average target price for CCS stock is $55 which is quite low compared to my estimates, but I am also planning for the next 2 years.


CCS stock risks:


The key risk is the potential for a deep economic recession. For now, the US government is injecting trillions of dollars into the economy and seems to want to continue doing this. Now, while this currently works, not sure if economists are thinking ahead of how to painlessly remove this dollar-injecting needle from the economy that has already hooked to this money influx. Removing this support even after COVID is over may result in a recession. However, nobody knows at the moment what will happen.


As this risk is always present for homebuilding accompanies which never sit on cash, but invest it into building their next block of homes the PE for this industry accounts for this risk. Also, as you can see below the PE does fluctuate in moments of economic fear or excitement and can range from 6 to 16. So, if you plan to invest, be prepared to hold and wait till the market puts a fair price on this stock.




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