3 Reasons to Avoid PHM and 1 Stock to Buy Instead

Since January 2021, the S&P 500 has delivered a total return of 82.8%. But one standout stock has more than doubled the market - over the past five years, PulteGroup has surged 214% to $133.75 per share. Its momentum hasn’t stopped as it’s also gained 18.5% in the last six months, beating the S&P by 7.4%.

Is there a buying opportunity in PulteGroup, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Is PulteGroup Not Exciting?

Despite the momentum, we're cautious about PulteGroup. Here are three reasons why PHM doesn't excite us and a stock we'd rather own.

1. Backlog Declines as Orders Drop

We can better understand Home Builders companies by analyzing their backlog. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into PulteGroup’s future revenue streams.

PulteGroup’s backlog came in at $6.23 billion in the latest quarter, and it averaged 8.2% year-on-year declines over the last two years. This performance was underwhelming and shows the company is not winning new orders. It also suggests there may be increasing competition or market saturation.

2. Revenue Projections Show Stormy Skies Ahead

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect PulteGroup’s revenue to drop by 6.4%, a decrease from its 10.4% annualized growth for the past five years. This projection is underwhelming and implies its products and services will see some demand headwinds.

3. EPS Growth Has Stalled Over the Last Two Years

Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.

PulteGroup’s flat EPS over the last two years was worse than its 2.3% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

Final Judgment

PulteGroup’s business quality ultimately falls short of our standards. With its shares topping the market in recent months, the stock trades at 12.6× forward P/E (or $133.75 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are more exciting stocks to buy at the moment. Let us point you toward the Amazon and PayPal of Latin America.

Stocks We Would Buy Instead of PulteGroup

Check out the high-quality names we’ve flagged in our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).

Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.