Once highly fragmented and inherently cyclical, the homebuilding business is slowly being taken over by larger, better-managed companies like Ryland Group (RYL).

This homebuilder is one of the best run in the business with experienced management and a conservative balance sheet. One of Ryland's notable talents is its ability to turn over land more quickly than its rivals, reducing carrying costs and lowering operating risk.

Ryland is one of Value Line's top homebuilder picks. Analyst William Ferguson says it "offers one of the best combinations of earnings growth and risk mitigation in the industry. Indeed, its earnings in the first half of this year were 40% higher than last, and analysts expect the company to maintain double-digit growth over the next three to five years. Ryland also is experiencing a solid growth in orders. It currently holds the highest backlog of orders in its history, which should help cushion it should the housing market take a downturn.

Ferguson isn't alone in his evaluation of the company -- seven out of the nine analysts that cover Ryland closely think now is still a good time to buy. The stock trades at nine times 2004 consensus earnings estimates of $9.17 per share.

For more on the prospects of homebuilding stocks, see Home Sweet Homebuilders.

--Erin Burt

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