Residential lot developer Forestar Group (NYSE: FOR) beat Wall Street’s revenue expectations in Q3 CY2025, with sales up 21.6% year on year to $670.5 million. Its non-GAAP profit of $1.70 per share was 34.9% above analysts’ consensus estimates.
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Forestar Group (FOR) Q3 CY2025 Highlights:
- Revenue: $670.5 million vs analyst estimates of $552.7 million (21.6% year-on-year growth, 21.3% beat)
- Adjusted EPS: $1.70 vs analyst estimates of $1.26 (34.9% beat)
- Adjusted EBITDA: $112.4 million vs analyst estimates of $85.31 million (16.8% margin, 31.8% beat)
- Operating Margin: 16.6%, down from 18.9% in the same quarter last year
- Free Cash Flow Margin: 38.1%, up from 21.5% in the same quarter last year
- Sales Volumes fell 9% year on year (7.8% in the same quarter last year)
- Market Capitalization: $1.39 billion
Company Overview
As a majority-owned subsidiary of homebuilding giant D.R. Horton, Forestar Group (NYSE: FOR) develops and sells finished residential lots to homebuilders, focusing primarily on land acquisition and development for single-family homes.
Revenue Growth
A company’s long-term sales performance can indicate its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Over the last five years, Forestar Group grew its sales at a 12.3% annual rate. Although this growth is acceptable on an absolute basis, it fell short of our standards for the consumer discretionary sector, which enjoys a number of secular tailwinds.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Forestar Group’s recent performance shows its demand has slowed as its annualized revenue growth of 7.6% over the last two years was below its five-year trend. 
Forestar Group also reports its number of number of lots sold, which reached 4,891 in the latest quarter. Over the last two years, Forestar Group’s number of lots sold averaged 2.8% year-on-year growth. Because this number is lower than its revenue growth, we can see the company benefited from price increases. 
This quarter, Forestar Group reported robust year-on-year revenue growth of 21.6%, and its $670.5 million of revenue topped Wall Street estimates by 21.3%.
Looking ahead, sell-side analysts expect revenue to remain flat over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and implies its products and services will face some demand challenges.
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Operating Margin
Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.
Forestar Group’s operating margin has shrunk over the last 12 months and averaged 14.6% over the last two years. The company’s profitability was mediocre for a consumer discretionary business and shows it couldn’t pass its higher operating expenses onto its customers.
In Q3, Forestar Group generated an operating margin profit margin of 16.6%, down 2.3 percentage points year on year. This contraction shows it was less efficient because its expenses grew faster than its revenue.
Earnings Per Share
Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.
Forestar Group’s EPS grew at a weak 21.3% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 12.3% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.
In Q3, Forestar Group reported adjusted EPS of $1.70, up from $1.60 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Forestar Group’s full-year EPS of $3.31 to shrink by 8.7%.
Key Takeaways from Forestar Group’s Q3 Results
It was good to see Forestar Group beat analysts’ EPS expectations this quarter. We were also excited its EBITDA outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a good print with some key areas of upside. The stock remained flat at $27.92 immediately following the results.
Sure, Forestar Group had a solid quarter, but if we look at the bigger picture, is this stock a buy? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here (it’s free).
