BZH

We rate BEAZER HOMES USA INC (BZH) as a Reduce with a composite score of 40.6/100 at a current price of $26.44. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in investment (54th percentile) and momentum (53th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (18th percentile) and value (19th percentile) tempers our overall conviction. We assign a No Moat rating (28/100), High uncertainty, and Poor capital allocation.

Key items to watch: balance sheet deleveraging progress; the path to profitability; valuation compression risk if growth disappoints. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

BEAZER HOMES USA INC holds a top-quartile position (#0 of 50) within the Construction sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 40.6/100 places it at rank #3459 in our full 7,333-stock universe. At $603M in market capitalization, BEAZER HOMES USA INC is a small-cap player in the Construction space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -39% combined with momentum at the 53th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 14% (-10.2pp vs sector) narrow to operating margins of -2% (-9.0pp vs sector) and net margins of -1.5%, yielding a gross-to-net conversion rate of -11%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $26.44, BEAZER HOMES USA INC is trading at a premium to fundamental value. Our value factor score of 19/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at P/B of 0.7x, P/S of 0.4x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a High uncertainty rating to BEAZER HOMES USA INC. Key risk factors include significant leverage (120% debt-to-equity), current negative profitability (net margin -1.5%), weak quality scores (18th percentile). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: significant leverage (120% debt-to-equity); current negative profitability (net margin -1.5%); weak quality scores (18th percentile); the combination of leverage (120% D/E) and thin margins (-1.5% net) amplifies downside risk. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 50th percentile and quality factor at the 18th percentile provide a quantitative summary of the overall risk landscape.

We identify limited risk mitigants at this time, which contributes to our high uncertainty assessment. Investors should monitor for improvement in balance sheet metrics, margin stability, and business predictability that could warrant a downgrade in our risk assessment over time.

We rate BEAZER HOMES USA INC's capital allocation as Poor. Key concerns include low returns on equity (-1.4%), negative profitability, weak asset returns (ROA -0.6%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — BEAZER HOMES USA INC significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, BEAZER HOMES USA INC receives a Reduce rating with a composite score of 40.6/100 (rank #3459 of 7,333). Our quantitative framework assigns a No Moat (28/100, trend: stable), High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 39/100.

Our analysis does not support a constructive view on BEAZER HOMES USA INC at this time. The combination of limited competitive advantages, high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.