On the four Ms, Smith Douglas Homes Corp earns 95 for management and 20 for moat. The management score rests on a return on invested capital of 13.1% and a gross margin of 21.8% — figures that describe a business turning capital into profit efficiently. Debt sits at 0.85x equity. The narrow moat and exceptional management are not the same judgement, and the gap between them is where the argument about this business sits.
The valuation runs on assumptions chosen to understate rather than flatter. Growth is modelled at 13.4% a year, the rate measured from the filings. The exit multiple assumed is 14.1x. That produces an intrinsic value of $8.75, a 10-CAP price of $38.56 and a payback time price of $56.49, with the value zone set at the highest of the three, $56.49. Today's price of $10.14 sits inside that zone.
The price sits inside the value zone, but the business scores 20 for moat and 95 for management. Cheap and good are different tests, and only one of them is passed here.
| Price | $10.14 |
| Market cap | $84.6M |
| P/E ratio | 14.1x |
| Return on invested capital | 13.1% |
| Gross margin | 21.8% |
| Debt to equity | 0.85x |
| Free cash flow yield | -24.4% |
| Growth rate used | 13.4% |
| Growth rate measured | 13.0% |
| Exit multiple assumed | 14.1x |
| Company | Moat | Buy price |
| Green Brick Partners Inc (GRBK) | 74 | $40.17 |
| M/I Homes Inc (MHO) | 44 | $87.81 |
| Toll Brothers Inc. (TOL) | 79 | $141.96 |
| NVR, Inc. (NVR) | 49 | $3,927.46 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Smith Douglas Homes Corp rather than accepting ours.