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Vice President Harris's plan to build three million homes has spiked optimism among those investing in homebuilder stocks. Bloomberg recently reported that since the start of the third quarter, homebuilder stocks have risen to become the fifth-best-performing group out of the 158 segments of the S&P 1500 Composite index.

Large companies like D.R. Horton and Lennar have seen massive gains quickly, and homebuilder ETFs have soared. Chasing the big homebuilders isn't the only way to play the trend. If falling mortgage rates and more favorable housing policies help accelerate demand for new homes, a rising tide will lift all boats, including some the market hasn't fully discovered yet.

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One of these may be Century Communities Inc. (NYSE:CCS). While it may not be a household name, it has a large footprint with 45 communities in 18 states. Entry-level buyers represent 93% of home deliveries. It has grown organically and by acquisition, most recently acquiring Landmark Homes of Tennessee in January.

Century Communities has two strategies. The flagship, Century Communities, sells homes through a mostly traditional model in which buyers tour model homes and make their selections and customizations. Century Complete sells through retail outlets and online instead of through model homes and caters to entry-level buyers. This arm of the business is nearly 100% spec and delivers a quick move-in. Century Communities sees this as a core advantage. "Spec production streamlines the construction process and leads to more efficient build times, drives increased profitability and quicker inventory turns, and allows buyers to more easily lock in mortgage rates for certainty of financing," Rob Francescon, Co-Chief Executive Officer and President of Century Communities, told Builder Magazine in an August interview.

What Investors Should Know About Century Communities

During the second quarter, Century Communities delivered 2,617 homes, up 17% year-over-year. Century Complete accounted for 36% of that business. Net new home contracts were up by 20% to 2,780. To prepare for future growth, the company increased its lot count by 35% year-over-year to 78,097. Like many other homebuilders, it uses a land-light strategy, focusing on controlled rather than owned lots. Controlled lots accounted for 58% of total lots. Lots for Century Complete currently represent 24% of the business.

Based on the positive results, the company raised its guidance. "Given the strong performance we have experienced through the first half of the year, we have increased our full-year 2024 guidance for home deliveries to be in the range of 10,700 to 11,300 homes and our home sales revenues to be in the range of $4.2 to $4.4 billion," said Rob Francescon.

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Century Communities has a market cap of approximately $3 billion. As of this writing, the stock is up around 38% this year and 251% over the last five years. The price-to-earnings ratio is 9.67, well below the S&P 500 average of 27.45. The dividend yield is 1.08%, and the stock currently has an annual payout of $1.04. Century Communities is rated a consensus Buy by six analysts. Homebuilder analyst Kenneth Zener of Seaport Global initiated coverage with a Neutral rating and no price target. Benzinga data revealed that co-CEOs Dale and Rob Francescon each sold 50,000 shares of stock last month for a total value of $9.24 million. For both, this represents less than 4% of shares owned.

Risks for Century Communities are similar to those for other homebuilders. While homebuilders currently have an advantage in the market, with around 30% of all listings being new builds, inventory is rising in many markets. An uptick in existing home inventory and sales could mean that all builders face increased competition. Century Communities has a diversified footprint, but around a third of its deliveries last quarter were in Texas and the Southeast, where inventory is rising. The company believes it can compete well even as existing home inventory increases because it can offer buydowns on interest rates.

Century Communities offers a potential investment opportunity, especially for those bullish on the long-term trends in U.S. housing. However, short-term volatility may arise due to macroeconomic factors such as rising interest rates and supply chain issues. Investors should consider the company's valuation, debt levels, and the broader economic outlook before making an investment decision.

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This article Could This Under-The-Radar Homebuilder Stock Be A Long-Term Winner? originally appeared on Benzinga.com