Breaking Down Forestar Group Inc. (FOR) Financial Health: Key Insights for Investors

You're looking at Forestar Group Inc. (FOR) and trying to figure out if its lot development model can keep delivering in a tricky housing market, and honestly, the fiscal year 2025 numbers show a mixed bag you need to dissect right now. The company absolutely grew the top line, with consolidated revenues increasing 10% to a strong $1.7 billion, but net income actually dropped 17% to $167.9 million, which means margin pressure is defintely a real thing. Still, the balance sheet is rock-solid, showing a conservative net debt to total capital ratio of just 19.3% and total liquidity of $968.1 million, giving them a huge buffer. Plus, the forward visibility is excellent-they have 23,800 lots under contract for sale, representing about $2.1 billion in future revenue. So, the question isn't about their ability to sell, but whether they can defend their profit per lot as affordability constraints continue to bite.

Revenue Analysis

You want to know where the money is coming from at Forestar Group Inc. (FOR), and whether that source is stable. The direct takeaway is that Forestar's revenue engine is firing, posting a strong 10% year-over-year growth in fiscal year 2025, with total consolidated revenues reaching $1,662.4 million. But the real story is how they got there: they leaned on pricing power, not just volume.

The Core Revenue Stream: Finished Lots

Forestar Group Inc. is a pure-play, national residential lot developer. That means their revenue stream is straightforward: they acquire and develop raw land into finished, entitled single-family residential lots, and then sell them to homebuilders. This is a manufacturing approach to land development, focusing on short-duration projects. In fiscal 2025, the company delivered 14,240 lots. That's the entire business, really.

The primary customer is D.R. Horton, Inc., which is also the majority owner of Forestar Group Inc.. This relationship is a critical competitive edge, but also a concentration risk you must watch. Still, the company is actively working to diversify, with sales to customers other than D.R. Horton, Inc. also increasing, including sales to lot bankers who will eventually sell to D.R. Horton, Inc..

Growth Driven by Price, Not Just Volume

The 10% revenue increase to $1,662.4 million in fiscal 2025 is defintely a win, but it masks a crucial shift in the market dynamics. The growth was primarily driven by an increase in the average selling price per lot, not just selling more lots. Here's the quick math on the key drivers:

• Total Lots Sold (FY2025): 14,240 lots.
• Average Sales Price per Lot (FY2025): $108,400.
• Year-over-Year Revenue Growth: 10%.

To be fair, the lot volume in the final quarter of 2025 actually decreased by 9%, but a significant 24% increase in the average sales price to $115,700 in that quarter more than compensated, driving the quarterly revenue up by 22%. This shows strong pricing power in a market characterized by constrained lot supply.

Fiscal 2025 Revenue Performance Snapshot

Mapping the near-term risks and opportunities is easier when you see the numbers side-by-side. The revenue growth is solid, but the net income decline suggests rising costs-something to investigate further in Breaking Down Forestar Group Inc. (FOR) Financial Health: Key Insights for Investors.

What this estimate hides is the potential for a slowdown if lot prices hit an affordability ceiling for the entry-level and first-time move-up buyers Forestar targets. Your action item is to track the sales price trend against mortgage rate movements, because that's the real pressure point for future volume.

Profitability Metrics

You're looking for a clear picture of Forestar Group Inc. (FOR)'s financial engine-how efficiently they turn lot sales into profit. The quick takeaway is that while their gross margin is strong, operational costs are eating into the bottom line, causing a notable dip in net profitability for the 2025 fiscal year.

Forestar Group Inc. reported consolidated revenues of $1.7 billion for the fiscal year ending September 30, 2025, a 10% increase year-over-year. Still, the cost of generating that revenue, coupled with rising overhead, has pressured their margins. This is a classic case of growth outpacing operational efficiency in a tougher market.

Margin Analysis: Gross, Operating, and Net

We need to look past the top-line revenue growth and check the three key profit margins: Gross, Operating, and Net. Here's the quick math for the 2025 fiscal year, which shows where the profit erosion is happening:

• Gross Profit Margin: 21.9% ($363.5 million Gross Profit on $1.66 billion in revenue).
• Operating Profit Margin: 12.6% ($209.1 million Operating Profit).
• Net Profit Margin: 9.9% ($167.9 million Net Income on $1.66 billion in revenue).

The Gross Profit Margin is solid, but the drop-off to the Operating Margin is where you see the platform expansion costs bite. The company's Selling, General, and Administrative (SG&A) expense rose to 9.3% of revenues in FY 2025, up from 7.9% in the prior year, directly limiting operating leverage.

Profitability Trends and Industry Comparison

The trend over the past year is the most critical factor here. Forestar Group Inc.'s net profitability has slipped significantly. The company's latest net profit margin of approximately 9.9% (or the trailing twelve months figure of 10.1%) is a noticeable drop from the 13.5% reported in the prior fiscal year (FY 2024). Pre-tax income decreased by 19% in FY 2025, largely due to higher costs and expenses.

When you compare these figures to the broader industry, Forestar Group Inc. is holding its own on a relative basis, but the direction of travel is concerning. For the residential development industry, typical gross profit margins generally range between 15% and 30%, and successful developers target net profit margins between 8% and 15%.

The company's gross margin of 21.9% is competitive, showing they maintain pricing power and cost control on the direct development side. The real risk is the SG&A creep; that 9.3% of revenue for overhead shows the cost of expanding their platform into new markets, which you can read more about in their Mission Statement, Vision, & Core Values of Forestar Group Inc. (FOR).

This rise in overhead is a necessary evil for a growth strategy, but it needs to be managed defintely. The key action here is to watch the next few quarters for signs of operating leverage improving-meaning revenue growth should start outpacing the growth in SG&A expenses. If that doesn't happen, the net margin will continue to compress.

Debt vs. Equity Structure

When you look at a company like Forestar Group Inc. (FOR), the first thing you want to know is how they pay for their growth-is it through borrowing (debt) or owner's money (equity)? For a capital-intensive business like residential lot development, the balance here is defintely critical. Forestar Group Inc. is running a notably conservative capital structure, which is a clear signal of financial discipline in a high-interest-rate environment.

As of the end of fiscal year 2025, which closed on September 30, Forestar Group Inc. reported total consolidated debt of $802.7 million. The good news is that this debt is almost entirely long-term, meaning no immediate maturity pressure. This strategic approach to financing is what keeps their liquidity strong.

Here's the quick look at their debt composition:

• 5.0% Senior Notes: $300 million due in 2028.
• 6.5% Senior Notes: $500 million due in 2033.

The company's primary measure of leverage, the net debt to total capital ratio (which is debt net of cash divided by equity plus net debt), stood at a very healthy 19.3% at the close of fiscal 2025. That's a low number for this business. For context, Forestar Group Inc.'s own long-term target is to keep this ratio at 40% or less.

Recent Debt Management: Trading Lower Rate for Longer Runway

Forestar Group Inc. was proactive in managing its debt profile in 2025, which is a smart move when capital markets are volatile. In March 2025, they issued $500 million in new 6.500% senior unsecured notes due 2033. They used the proceeds to fund a tender offer for their older 3.850% Senior Notes that were due in 2026.

Here's the trade-off: The new notes carry a higher interest rate, but they push the maturity date out significantly to 2033. This is a classic move to secure long-term stability over short-term interest savings. It removes any near-term refinancing risk, which is crucial for a company with a significant land pipeline. They also redeemed the remaining $70.6 million of the 3.85% notes in September 2025.

The company also bolstered its flexibility by amending its senior unsecured revolving credit facility, increasing the aggregate lender commitments to $640 million in late 2024 and later to $665 million post-September 30, 2025, extending the maturity to December 2029. This is their emergency fund, and it's substantial.

Leverage Compared to Peers

You need to compare Forestar Group Inc.'s leverage to its peers to see if that 19.3% net debt to total capital ratio is genuinely conservative. While the general homebuilding industry average Debt-to-Equity ratio is around 0.3786 (or 37.86%), the Net Debt to Total Capital ratio is a cleaner metric for land developers. Forestar Group Inc.'s majority owner, D.R. Horton, reported an even lower net debt to total capital ratio of 11.0% in fiscal 2025. Another peer, KB Home, reported a debt-to-capital ratio of 32.2% in Q2 2025.

Forestar Group Inc. is clearly on the low end of the leverage spectrum for the sector, especially compared to their own maximum target. This conservative approach is a strategic advantage, giving them a large cushion to fund their land acquisition and development investments, which totaled $684.4 million in just the first quarter of fiscal 2025. It means they rely more on retained earnings and equity, not just debt, to fund their operations. You can find more details on their overall financial health in Breaking Down Forestar Group Inc. (FOR) Financial Health: Key Insights for Investors.

Liquidity and Solvency

You need to know if Forestar Group Inc. (FOR) can meet its near-term obligations, and the quick answer is yes, absolutely. The company's liquidity position is defintely strong, primarily driven by a massive inventory of real estate assets and a substantial cash buffer, but you must look past the headline numbers to see the capital-intensive nature of their business.

As of the end of the 2025 fiscal year (September 30, 2025), Forestar Group Inc.'s total liquidity stood at a robust $968.1 million, which includes cash and available borrowing capacity. This provides a significant cushion to manage market fluctuations and fund their aggressive lot development strategy.

• Current Ratio: 5.6 as of September 2025.
• Quick Ratio: 1.33 for fiscal year 2025.

The current ratio, which compares current assets to current liabilities, is exceptionally high at 5.6, showing the company has $5.60 in current assets for every dollar of current liabilities. This is a massive jump from the prior year's 1.17. The quick ratio, which strips out inventory-a less liquid asset-is a more modest but still healthy 1.33. The difference between the two ratios is the key insight here: Forestar Group Inc.'s current assets are heavily weighted toward its real estate inventory, which totaled approximately $2.65 billion at year-end. That's a lot of dirt waiting to be turned into dollars.

Working Capital and Cash Flow Dynamics

The high current ratio reflects a strong working capital position, but for a lot developer, working capital is mostly land. The trend in working capital is directly tied to the company's investment strategy: they are pouring capital into new lot development to fuel future growth. This is where the cash flow statement tells a more nuanced story.

For the full 2025 fiscal year, Forestar Group Inc. reported a negative cash flow from operating activities (CFOA) of $(197.7) million. Here's the quick math: this outflow is primarily due to the increased investment in real estate inventory-they are spending cash now to acquire and develop land for sales in 2026 and beyond. This is a common, though not always comfortable, trend for high-growth land developers. The operating cash flow is negative because the company is essentially stockpiling its product.

The financing cash flow picture shows how they are funding this growth. Debt at September 30, 2025, totaled $802.7 million, up from the prior year. This includes the issuance of $500 million in 6.5% senior unsecured notes due 2033, which was used to fund the land investment and manage their debt maturity profile. They are using their balance sheet strength to secure long-term capital for their growth plans, which you can read more about here: Mission Statement, Vision, & Core Values of Forestar Group Inc. (FOR).

Near-Term Liquidity Assessment

The company's liquidity is a clear strength. The high current and quick ratios, combined with nearly a billion dollars in total liquidity, mean Forestar Group Inc. has no immediate trouble meeting its short-term obligations. What this estimate hides is the risk inherent in a large inventory: if the housing market slows significantly, the $2.65 billion in real estate assets could take longer to convert to cash, impacting future operating cash flow generation. Still, the strategic relationship with D.R. Horton, Inc., their majority owner and primary customer, provides a built-in demand engine that mitigates much of that inventory risk. The liquidity is there, but the negative operating cash flow is a reminder that this is a long-cycle business that demands constant capital feeding.

Valuation Analysis

You're looking at Forestar Group Inc. (FOR) and trying to figure out if the market is giving you a fair deal, or if you're defintely paying too much for their residential lot development business. The short answer is that, based on key metrics for the 2025 fiscal year, the stock appears significantly undervalued compared to the broader market and even its own book value.

Forestar Group Inc.'s valuation multiples are exceptionally low, which is typical for cyclical real estate development companies but still notable. As of mid-November 2025, the stock trades at a trailing Price-to-Earnings (P/E) ratio of around 7.05. To be fair, this is a fraction of the S&P 500 average, suggesting a deep discount on its earnings power.

Here's the quick math on the key valuation ratios:

• Price-to-Earnings (P/E): 7.05x
• Enterprise Value-to-EBITDA (EV/EBITDA): 7.41x
• Price-to-Book (P/B): Approximately 0.67x

The P/B ratio is especially compelling. With a stock price around $23.34 and a book value per share of $34.78 as of September 30, 2025, the 0.67x P/B suggests the market is valuing the company at roughly two-thirds of its accounting value. That's a classic sign of potential undervaluation, though what this estimate hides is the market's concern about the future value of its land inventory in a slowing housing market.

Stock Performance and Analyst Sentiment

The stock's performance over the last year reflects the market's uncertainty. Over the 12 months leading up to November 20, 2025, the stock price actually fell by 19.29%. Still, the price has traded in a wide band, hitting a 52-week low of $18.00 and a 52-week high of $31.19.

This volatility is natural for a land developer, but the recent Q4 2025 earnings beat, with diluted EPS of $1.70, shows the business is performing well right now. You need to look beyond the recent price dip and focus on the future.

The analyst community is largely positive. The consensus recommendation is a 'Moderate Buy,' with some firms even rating it a 'Strong Buy.' The average 12-month price target is around $32.50, with a range from a low of $25.00 to a high of $36.00. This average target implies a significant upside from the current price, indicating analysts see the low valuation as a temporary disconnect.

Forestar Group Inc. does not currently pay a common stock dividend. The Trailing Twelve Months (TTM) dividend payout is $0.00, and the dividend yield is 0.00%. This isn't a dividend play; it's a growth and value play where capital is reinvested into the business-specifically, into acquiring and developing its 99,800 owned and controlled lots. If you want to dive deeper into who is buying and why, you can check out Exploring Forestar Group Inc. (FOR) Investor Profile: Who's Buying and Why?

The clear action here is to benchmark that 0.67x P/B against other land developers. If the discount is too wide, you have a solid investment thesis.

Risk Factors

You're looking at Forestar Group Inc. (FOR) and seeing a lot of strong fundamentals, but every investment has its fault lines. As a residential lot developer, Forestar is defintely exposed to the cyclical nature of the housing market, but the biggest risks are both external (macro) and internal (structural). We need to map these near-term challenges to the company's 2025 fiscal year performance.

The core risk is concentration. Forestar Group Inc.'s business model is inextricably linked to D.R. Horton, Inc., which is not just its primary customer but also its controlling shareholder, owning approximately 62% of the common stock. This relationship, while providing a massive, predictable demand pipeline-like the 23,800 lots under contract for about $2.1 billion in remaining sales-also creates a single point of failure. Any significant change in D.R. Horton's strategy or financial health immediately impacts Forestar Group Inc.

Here's a quick look at the operational and financial risks that materialized in the fiscal year ended September 30, 2025:

• Profitability Pressure: Net Income declined 17% to $167.9 million in FY 2025, down from $203.4 million in the prior year.
• Margin Erosion: Gross profit margins slipped from 22.5% to 20.4% over the last year, a direct result of higher costs for land, labor, and materials.
• Cash Flow Strain: Operating cash flow was a significant outflow of approximately $(197.7) million, primarily due to increased investment in real estate assets.

The external environment is still tough. High inflation and elevated interest rates-the Federal Reserve's higher-for-longer policy-continue to weigh on homebuyer affordability. This macro headwind directly slows the pace of lot absorption, which means Forestar Group Inc. holds inventory longer than planned. Plus, the company's debt increased to $802.7 million at year-end, up from $706.4 million, including the issuance of $500 million of 6.5% senior notes due 2033. That higher borrowing cost eats into future margins.

Mitigation Strategies and Risk Mapping

To be fair, Forestar Group Inc. is not just sitting on its hands. Its mitigation strategy centers on two things: discipline and diversification. The company's long-standing strategic relationship with D.R. Horton is formalized through a Master Supply Agreement and Stockholder's Agreement, which provides some structural protection and demand visibility. You can read more about their strategic alignment in the Mission Statement, Vision, & Core Values of Forestar Group Inc. (FOR).

On the operational side, they use a strict underwriting process for new projects, requiring a minimum 15% return on average inventory and a quick return of the initial investment within 36 months. This focus on short-duration, phased development is designed to reduce exposure to long-term market swings. Also, operating in 64 markets across 23 states helps diversify away from local or regional economic downturns.

Here's the quick math on their leverage and liquidity, which shows a solid buffer against near-term financial shocks:

What this estimate hides is the potential for a severe housing market correction, which would stress the value of their $2.6 billion in real estate assets. Still, the company's strong liquidity and controlled debt ratio suggest it can weather a moderate downturn.

Growth Opportunities

You're looking at Forestar Group Inc. (FOR), a pure-play residential lot developer, and the future looks defintely grounded in their strategic model. The core takeaway is this: their growth isn't about massive, risky land speculation; it's a high-velocity, low-leverage lot manufacturing process built on a crucial partnership. They've already delivered strong results for the fiscal year 2025, which ended September 30, 2025, and have a clear runway for the near-term.

For the full fiscal year 2025, Forestar Group Inc. reported consolidated revenues of approximately $1.7 billion, a 10% increase year-over-year, on the sale of 14,240 lots. This shows their ability to execute even with fluctuating market conditions. Their net income for the year was $167.9 million, translating to $3.29 per diluted share.

Key Growth Drivers and Competitive Edge

The company's competitive advantage isn't a secret; it's a structural one. Forestar Group Inc. is a majority-owned subsidiary of D.R. Horton, Inc., the largest homebuilder in the United States. This relationship is the single biggest driver of their stability and volume.

• Strategic Partnership: The relationship with D.R. Horton provides a steady, high-volume demand channel for their finished lots, reducing market risk. As of September 30, 2025, D.R. Horton had a right of first offer on 17,600 of Forestar Group Inc.'s owned lots.
• Contracted Future Revenue: They have significant revenue visibility. They ended fiscal 2025 with 23,800 lots under contract for sale, representing approximately $2.1 billion of future revenue. That's a solid backlog.
• Geographic Diversification: Forestar Group Inc. operates in 64 markets across 23 states, which helps insulate them from downturns in any single regional housing market.

Their business model focuses on short-duration, phased development projects, which translates to a faster asset turn and helps keep their balance sheet strong. They ended fiscal 2025 with a conservative net debt to total capital ratio of 19.3% and total liquidity of $968.1 million. That strong liquidity gives them flexibility to invest in new land when others might pull back.

Future Revenue and Earnings Projections

Looking ahead, the company's guidance for fiscal 2026 suggests a year of stable, high-volume lot delivery. This is a realist's forecast, not a pie-in-the-sky one.

Here's the quick math on their forward-looking guidance:

What this estimate hides is the potential for average sales price per lot (ASP) to rise, which drove their Q4 2025 revenue beat. The average sales price per lot rose to $115,700 in Q4 2025, a 24% increase year-over-year, which is a key factor to watch. If market demand remains robust, that ASP tailwind could push revenues toward the high end of the 2026 guidance.

The strategic initiative here is simply to continue aggregating market share in the fragmented lot development industry. They controlled 99,800 lots at the end of fiscal 2025, which is their land bank for future growth. They plan to invest approximately $2.0 billion in land acquisition and development in fiscal 2025, positioning them for continued growth beyond 2026. For a deeper dive into the financials, you can check out Breaking Down Forestar Group Inc. (FOR) Financial Health: Key Insights for Investors.