MKM Partners analyst Megan McGrath has been reviewing homebuilders today, upgrading KB Home (KBH) to Neutral and now Ryland Group (RYL) to Buy, as she sees the risk-reward compelling at current levels.
In a note out today, McGrath maintained her $22 price target on the stock and wrote that that there is less downside risk from uninspiring housing data now that the stock has come off 8% in the past several weeks, as investors now have more realistic expectations.  ”We continue to believe that Ryland will be profitable for 2012 (although not likely for 1Q), and anticipate that there could be some upside to our order growth and pricing estimates if the company meets its community count growth targets.”
McGrath also reiterated her belief that the housing market is bottoming, and she estimates 10% new home sales growth for 2012, which should allow many homebuilders to outperform the market. For Ryland she predicts 14%$ growth.
