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Subject:  Re: Orleans Home Builder Date:  3/22/2006  12:13 PM
Author:  TMFBigFrog Number:  4198 of 15207

Hi Rajesh,

Orleans Home Builder (OHB) trades significantly below the book value

Where are you getting your information that says that? According to yahoo finance, on this page: it looks as though it trades at 1.38 times its book value. Looking at Yahoo's representation of its balance sheet (see ), it has $283,857,000 in shareholders' equity on the books, of which $20,514,000 is "goodwill" and $4,111,000 is "other intangibles".

By my estimations, that leaves $259,252,000 in book value, excluding good will and other intangibles. With a market cap of about $351,200,000 (see again ), that gives it a price to book (excluding intangibles) of about 1.35 -- consistent with Yahoo's calculation.

Additionally, look at the "enterprise value" of the company (same page as above). That number is reported at about $850 million. Enterprise value is market price plus net debt. That its enterprise value is so much higer than its market cap indicates that the business is highly leveraged, which is typical for a homebuilder. In a rising market for its products, that's not a problem, but homebuilders are notoriously cyclical. Interest rates in general are rising, and home prices nationally are not climbing as dramatically as they have been in recent past years -- in some parts of the country, they've actually begun retreating. Neither one of those signs is a good signal for a heavily leveraged homebuilder.

Hope this helps provide some perspective.

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