Gavin Rinehardt
CASE STUDY —
CFA Research Competition
An in-depth equity research analysis and valuation of a publicly traded homebuilder, developed for the CFA Institute Research Challenge to provide actionable investment insights.
SKILLS IN THIS REPORT
What I built and learned
06
[ Fig 1 ] Header of our Investment Report
I joined the CFA Research Challenge to apply what the classroom had only described. My team was assigned Green Brick Partners and two months to produce a full equity research report. Those two months taught us more about finance than any course had.
01
Financial Modeling
To know when to buy or sell a stock, you need the price at which it should trade. My teammates built the three-statement model; my job was turning their forecast into a target price. I built two independent models and averaged them.
Discounted cash flow
Calculated beta, equity risk premium, cost of equity, cost of debt, and tax rate; projected unlevered free cash flow; solved WACC and terminal value; discounted to present value and bridged enterprise value to implied equity value per share.
Relative valuation
Compared GRBK against a peer group of U.S. residential homebuilders on EV/EBITDA and P/E. P/E was straightforward; EV/EBITDA meant converting implied enterprise value back to equity value by adjusting several accounts. Both implied prices combined into the relative price.
[ Fig 2 ] Bottom of my DCF
[ Fig 3 ] My relative valuation model
“A clean model is more intuitive to follow and its errors are easier to track down. In my mind, a properly formatted model can even be considered a beautiful piece of art.”
02
Sensitivity analysis
A single target price implies a precision no model has. Small changes in the assumptions that matter most move the answer more than anything else in the workbook. I ran a sensitivity and scenario analysis to stress-test our thesis.
Sensitivity analysis
Calculated beta, equity risk premium, cost of equity, cost of debt, and tax rate; projected unlevered free cash flow; solved WACC and terminal value; discounted to present value and bridged enterprise value to implied equity value per share.
Scenario analysis
Compared GRBK against a peer group of U.S. residential homebuilders on EV/EBITDA and P/E. P/E was straightforward; EV/EBITDA meant converting implied enterprise value back to equity value by adjusting several accounts. Both implied prices combined into the relative price.
[ Fig 4 ] Terminal Growth Rate and WACC
[ Fig 5 ] Gross Margin and Revenue Growth
03
Accounting
"Accounting is the language of business". I hear this adage all the time, but for good reason. While this project didn't require any journal entries, everything in our report can only be understood with a firm grasp of accounting fundamentals. Here is an example of when I used accounting knowledge to analyse the impacts of Green Brick's unique home-building strategy.
Reading a land-intensive builder correctly
Green Brick owns its land instead of optioning it, so its statements read differently from a land-light peer's. Knowing how this strategic choice affects the financial statements was the difference between a comparison that works and one that quietly misleads.
$2.2B
of inventory carried on the balance sheet
Fewer option contracts mean fewer option fees and higher margins.
High exposure to real estate volatility and lower liquidity.
+
​–
Peers
lean more heavily on off-balance-sheet land options
More option contracts mean greater flexibility and higher liquidity.
Option fees eat into margins.
​–
+
It's a trade-off between margins and liquidity.
Green Brick's land-intensive approach looks risky unless you really look into their financials. They offset much of that risk with an unusually conservative balance sheet, with a debt-to-capital ratio of roughly 16–17%, which is mostly fixed-rate debt.
That low leverage gives Green Brick more flexibility to ride out housing downturns without being forced to sell land at unfavorable prices.
This analysis is only possible because I understood how the financial statements are connected and how a strategic choice can impact various KPIs.
04
Identifying Drivers
While my teammates built the three-statement model, everyone contributed to the revenue forecast. Over 98% of Green Brick's revenue comes from real estate sales, which, when broken down, is just a function of how many units are sold and at what price. By forecasting each driver independently, we were able to build a grounded forecast for total revenue.
[ Fig 5 ] Revenue Drivers Forecast
Units Delivered
To forecast units delivered, my team and I considered management’s plan for a controlled expansion into Texas, the industry’s shift toward more affordable spec homes, GRBK’s significant backlog, and several other drivers. While not every factor was explicitly referenced in the model, we evaluated a long list of variables to determine what would actually influence unit deliveries.
Average Selling Price
Average selling price was a bit easier to forecast. To meet consumer demand, the company is focusing significant effort on expanding its affordable Trophy Signature Homes brand. This will dilute the number of homes sold under their more luxury brands and draw down the average selling price.
05
Industry Research
I helped evaluate Green Brick within the broader homebuilding industry by identifying the economic forces that most directly affect housing demand and builder profitability.
We analyzed home prices, inflation, construction employment, mortgage rates, population growth, and regional housing conditions using data from sources including FRED, IBISWorld, company reports, and our own analysis.
FRED
Prices, rates, CPI, construction jobs
IBIS World
Industry and population data
Company Reports
Segment and peer figures
Our Analysis
Metrics built for the comparison
Regional conditions were also important because homebuilding is highly geographic. We examined employment, migration, affordability, competition, housing supply, and other market characteristics across Green Brick's operating regions to determine where industry trends created opportunities or risks for the company.
This process helped us move from broad observations to specific economic, political, and competitive opportunities and threats.
06
Teamwork
This competition was unlike anything I've ever done before, and I did a lot of learning on the fly. There was no way I could have finished this report on my own, which is why I am grateful to my amazing teammates. (I clearly didn't get the height memo)
[ Fig 6 ] The WTAMU CFA Research Team
From Day 1 to our final competition, we all had specific parts of the report we were responsible for, but we didn't operate in individual silos. Each member was dependent upon the others for information, so we spent much of our time working together in the same room and bouncing ideas back and forth. We made a point of verifying each other's work and calling out anything we thought fishy.
I won't pretend like everything was sunshine and roses. Tight deadlines, late nights, and miscommunication caused plenty of disagreements. We kept our interactions professional and remembered our shared goal whenever working through difficulties.
06
Writing Financial Reports
The first stage of this competition required a 20-page written equity research report. The download link to our report is at the top of this page.
Writing this report required coordinating with my teammates, identifying what to actually include in the paper, and writing in a way that our audience finds valuable. In this case, the judges are all CFAs, so we wrote in extreme detail, but we just as easily could have written using more approachable language a non-finance individual could understand.
Research is good and all, but of no value if it can't be communicated clearly to drive decision-making. This competition helped me refine my report-writing skills.
07
Public Speaking
The second stage of this competition required giving a 20-minute presentation to a panel of judges, where we presented our case and took questions.
We divided and memorized the script, coordinated where each person would stand, and rehearsed transitions, body language, pacing, and vocal emphasis. Our repeated practice and supplemental slideshow ensured our presentation was clear and informative.
We prepared for the Q&A as seriously as the presentation itself. Each team member developed answers to 10–20 likely questions so we could respond quickly and confidently under pressure. When a judge asked a question in my area, I stepped forward, addressed them directly, and gave a clear answer.