Analysts Outright Lying????
FloridaBuilder in his recent post tells us land values have crashed. Recent publicized land sales have closed at less than $0.20 cents on the dollar. Calculated Risk tells us about an improved deal selling for $0.15 cents on the dollar.
The analysts are well aware of the recent land deals. They also know that a material part of HB assets on the books is land. Further, it is clear that most public HBs have not impaired their land to anything close to current market value. Yet they still come out with ridiculous bordering on outright deceptive analysis......for example S&P's recent SPF recommendation:
"We believe SPF's high lot inventories in Cal. will become attractive when the housing market turns around. Applying aprice-to-book slightly below 0.5X to a forward book value of $14.75, in line with small builders, we are maintaining our 12-month target price at $7. /K. Leon-CPA"
Mr. CPA analyst knows that CA land is one of the most challenged in the country. Mr. CPA analyst knows much of SPF's assets is land. Mr. CPA analyst knows that SPF has not impaired its land to anywhere close to current market value. Mr. CPA analyst knows SPF's debt is MUCH MUCH MUCH more than the market value of its assets. Mr. CPA analyst knows SPF is losing hundreds of millions of dollars. Mr. CPA analyst knows that forseeable outlook is even more negative. So if Mr. CPA analyst applied an actual real world valuation to SPF's assets, SPF would have a likely have a NEGATIVE book value.
With a negative book value, what would .5X of a negative value be? How can this idiot(or something else?) maintain a $7 dollar price target and still keep a straight face.