This homebuilder is rated two notches above “defaulted” by Moody’s. It has more debt now than it had at the peak of the housing bubble in 2005 despite that fact that it is selling less than 30% of the number of homes that it sold in 2005.
One commonly used financial ratio is Debt/EBITDA. A typical industrial company might have 5x Debt/EBITDA. A company is considered overleveraged and financially riskly if its Debt/EBITDA is 10x. This homebuilder’s Debt/EBITDA is 22.5x!!
While shorting this company will likely yield at least 30-40% over the next year, I think this stock is going to zero. Or close to it. My report explains in detail why: Homebuilder Report. I also include options trading strategies and capital management advice.