Rhody Trader

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I came across NVR this morning while flipping through some stock charts. As you can see by the daily below, it’s recently broken down below $600 area support.

OK, that’s not a huge deal. Sure, we could be looking at about a 10% drop down to the $520 support area from the March lows. Could be a decent swing trade short.

Here’s the really interesting part, though. The stock has traded at a PE of between 3 and 11 on a trailing basis over the last five years. Right now the trailing PE is about 8. On a forward basis, though, that PE is more like 15. That’s because estimates for earnings this year are in the $30s. In order for NVR to be stay within that PE range, it would have fall to about $400 by year-end.

This would be an awesome put play situation. Unfortunately, there aren’t any options on NVR so you can make that trade. You’d have to do a straight short.

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