We came across a bullish thesis on Beazer Homes USA, Inc. (BZH) on Substack by Unemployed Value Degen. In this article, we will summarize the bulls’ thesis on BZH. Beazer Homes USA, Inc. (BZH)'s share was trading at $23.33 as of Feb 21^st. BZH’s trailing and forward P/E were 5.94 and 5.58 respectively according to Yahoo Finance.

A builder wearing a hard hat admiring a newly constructed smart home.

Beazer Homes (BZH) presents a compelling investment case, driven by its substantial land holdings, which are understated on its balance sheet, and its ongoing shift toward a growth-oriented strategy. Despite having a market capitalization of just $684 million, BZH holds $2.1 billion in inventory, much of which was acquired at lower prices, making it a strong hedge against inflation. The company’s $1 billion in long-term debt is not a concern, as inflation will erode its real value over time. However, management’s historical focus on tangible book value growth rather than sustainable expansion has created challenges. The recent pivot to aggressive capex in pursuit of a 200-community target by 2026 has weighed on short-term earnings. While growth capex will taper off once the target is met, the sudden shift highlights the lack of a long-term growth strategy. A more seasoned management team might have pursued a steadier trajectory, avoiding the volatility seen in recent quarters.

BZH shares have been volatile, dropping from $27.50 to $21.00 after the latest earnings report before recovering to around $22. Despite this, the stock remains significantly undervalued, trading at a steep discount to its $39.50 per share tangible book value. The recent earnings softness is largely seasonal, with management opting to preserve asset values rather than chasing discounts during a weak holiday season. Early signs of a rebound in January, coupled with a potentially lower interest rate environment, suggest a favorable setup for the stock. If BZH achieves its 200-community goal and refocuses on profitability, a medium-term rerating could see the stock double, closing the gap to its tangible book value. With land effectively on sale at half price, BZH offers an attractive risk/reward opportunity, with a price target of $43.51 by the end of 2026.

Beazer Homes USA, Inc. (BZH) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 25 hedge fund portfolios held BZH at the end of the third quarter which was 20 in the previous quarter. While we acknowledge the risk and potential of BZH as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BZH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.