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When a company has its initial public offering, the market often wants to wait and see how it fares. With three-quarters of the year done, it's the ideal time to check in on the first big IPO of the year, Smith Douglas Homes, a small-cap homebuilder stock.

Smith Douglas Homes had a long history before its stock market debut. It was founded in 2008 and is based in Georgia. The company designs and builds single-family homes in the Southeast, with Atlanta as its biggest market. It focuses on the entry-level and empty nest market, building houses with lower square footage and prices than some competitors. It is active in Georgia, North Carolina, Tennessee, Alabama, and Texas.

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Like many larger publicly traded homebuilders, it uses a land-light business model. That means it controls the land it needs for future home builds through purchase options rather than owning it outright. This gives a builder flexibility and more cash for its building projects. During the second quarter, it grew its total controlled lot position by 12%, with 96% of its unstarted controlled lots controlled via option agreement.

In the second quarter, Smith Douglas Homes sold 653 homes, a 17% increase year over year. Revenue grew by 22%. Net new orders rose 17% to 715, and the company had a backlog of 1,173 homes with an average selling price of $345,000 in the second quarter. "We ended the quarter with over $17 million of cash, nearly $345 million of stockholder's equity, and zero borrowings under our credit facility, resulting in a net-debt-to-net book capitalization of (4.1)%," said Russ Devendorf, Executive Vice President and Chief Financial Officer.

How Does It Stack Up With Other Homebuilders

While Smith Douglas Homes can't compete on scale with massive builders like Lennar (NYSE:LEN) or D.R. Horton (NYSE:DHI), it has an advantage regarding home prices. For the full year, it anticipates the average home sale price to be between $339,000 and $343,000. D.R. Horton had an average price of $380,000 last quarter, and Lennar expects an average price of $420,000 to $425,000 in the third quarter.

Smith Douglas Homes stock has outperformed Lennar and D.R. Horton so far this year, up 53%, while Lennar is up 23% and D.R. Horton is up 26% as of this writing. Lennar and D.R. Horton pay dividends, but Smith Douglas Homes does not. Only six analysts are tracking Smith Douglas, with a consensus rating of Neutral.

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In its second-quarter portfolio letter, next Century Growth Investors wrote that it has taken a stake in Smith Douglas Homes. The letter cited the company's strong value proposition for buyers because of its price point and described Smith Douglas Homes as "well-positioned to capture demand from the entry-level buyer."

Some risks Smith Douglas Homes faces are the same as those of other homebuilders. While the potential for lower interest rates has already lifted homebuilder stocks, many buyers may still remain on the sidelines. Builders are also subject to impacts from bad weather in the areas they build and changes in their input costs that could force them to increase home prices.

For Smith Douglas Homes, the biggest challenge may be scaling and competing in markets where other builders are already the leaders. So far, it appears to be off to a good start.

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This article Will This 2024 IPO Be A Real Estate Winner? originally appeared on Benzinga.com