This Homebuilder Stock Just Got A Rating Upgrade, But…

This Homebuilder Stock Just Got A Rating Upgrade, But It's A Fixer-Upper. Here's Why.

On Thursday, homebuilder PulteGroup got a notable upgrade to its Relative Strength (RS) Rating, from 66 to 80. The upgraded RS Rating shows that Pulte outpaced 80% of all stocks for price performance over the last 52 weeks.

It's notable because market research shows that the best stocks often have an RS Rating north of 80 as they begin their biggest climbs. However, Pulte's fundamentals could use some sprucing up.

Pulte Stock A Favorite Of Big Money Investors

The homebuilding giant says on its website it finished 31, 219 homes in 2024, valued at a collective $18 billion.

Atlanta-based PulteGroup boasts an A Accumulation/Distribution Rating, showing that institutional investors like ETFs are eager buyers of its stock. That's a bullish indicator because an estimated 70% of all trades are made by institutional buyers.

Pulte has a decent 81 Composite Rating though short of the 90 or better Composite that The IBD Methodology investors look for. Tellingly, its IBD relative strength line has been on the upswing since early June.

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However, Pulte's fundamentals are weak. It reported a 15% drop in earnings last quarter to $3.03 per share on a 4% dip in revenue to $4.4 billion. It was the second quarter of weak results in a row after putting up double-digit profit and sales growth numbers the last two quarters of 2024.

Still, PulteGroup stock is building a cup without handle with a 149.47 buy point. See if it can break out in volume at least 40% higher than normal.

According to the National Association of Realtors, the prices of homes are going up, and one reason is the continuing lack of affordable housing. "Home sales and the homeownership rate are underperforming relative to job growth," NAR Chief Economist Lawrence Yun said in a report out Tuesday.

No 4 Rank In Its Industry Group

That lack of housing is boosting shares of stocks for homebuilders like Pulte and peers like Taylor Morrison Home and M/I Homes. Pulte stock rose from an 88.07 low on April 9 amid the spring market correction to trade at 128.55 Thursday afternoon, down for the day.

Pulte holds the No. 4 rank among its peers in the 23-stock Building-Residential/Commercial industry group. Comstock Holding is the No. 1-ranked stock in the group.

The proprietary Relative Strength Rating measures market leadership by using a 1 (worst) to 99 (best) score that indicates how a stock's price action over the last 52 weeks matches up against the rest of the market.

This article was created automatically with Stats Perform's Wordsmith software using data and article templates supplied by Investor's Business Daily. An IBD journalist may have edited the article.