M/I Home (M/I) – still not time to go in.

M/I is a small-sized US homebuilder operating in 9 states.

In 2022, M/I was a much bigger company compared to that in 2005. Its 2022 revenue was 3 times bigger while its Net Income was almost 5 times larger. Unfortunately, its capital efficiency as measured by the gross profitability did not improve. I would also rate M/I's financial position as poor.

About 1/3 of its revenue growth was driven by growth in house prices. As such, I valued M/I as a cyclical company, but with a growth path capped at the US long-term GDP growth rate of 5%.

I carried out a valuation of M/I at the end of Jul 2023 different gross profit margin assumptions. It showed that there is not enough margin of safety even under the most optimistic scenario.

M/I price was then USD 96 per share. Today the share price has dropped by 17 % to USD 80 per share. If you look at the infographic, there is still not enough margin of safety.