NOBILITY HOMES INC (NOBH) stock intrinsic value fair value estimate & owner earnings analysis

Nobility Homes designs and builds manufactured and modular homes at a single plant in Ocala, Florida, and sells most of them through its own Prestige retail sales centers: ten centers in Florida, eight of which it owns. Prestige produced 80% of sales in fiscal 2025 (88% in fiscal 2024). The rest goes wholesale to independent dealers and to manufactured-home communities. One real estate investment trust customer accounted for about 10% of sales. The company has no borrowings. At August 1, 2026 it held about $13.4 million of cash plus about $12.4 million of certificates of deposit and short-term investments. What the business earns: we measure the cash the owners could take out each year. That is operating cash flow with working-capital swings removed, minus stock compensation and the capital spending needed to keep the business as it is. Capital spending is small, about 1.5% of sales. Working-capital swings are large here. Customer deposits rose by $8.6 million in fiscal 2021 and inventory rose by $11.8 million in fiscal 2022, so reported cash flow jumps around much more than the underlying earnings. Because we add the cash pile to the value separately, we take the after-tax interest it earns (about $1.1 million pre-tax in fiscal 2025) out of the operating earnings. We do the same with the Majestic 21 finance joint venture with 21st Mortgage. Its loan book is running off, and the company says its earnings will keep falling. A one-off $1.6 million distribution from it in fiscal 2024 is excluded. On that basis the operating business produced about $5.7 million in fiscal 2019, $5.8 million in 2020, $4.1 million in 2021, $5.8 million in 2022, $10.0 million in 2023, $7.4 million in 2024 and $7.8 million in 2025. Starting level: we use $5.8 million a year (about $1.84 a share on 3.16 million shares). That is the median of fiscal 2019 to 2025, a window covering the year before the pandemic, the housing boom and the slowdown since. Earlier years (fiscal 2016 to 2018) came from a smaller business with gross margins in the low-to-mid 20s, against generally 29% to 34% since 2019 (25% in fiscal 2021). The 2023 to 2025 years were lifted by gross margins of 32% to 34% that are now fading. Gross margin slipped from 34% in fiscal 2024 to 32% in fiscal 2025 and was about 29% in the first nine months of fiscal 2026. Homes sold through company stores fell from 295 to 257 in fiscal 2025, offset by more lower-margin dealer sales (172 versus 129). The company reports that Florida industry shipments fell about 9% that year. In the first nine months of fiscal 2026, sales were $35.1 million against $39.0 million a year earlier and net income was $5.3 million against $6.1 million. The third quarter was flat on the prior year at $12.1 million of sales. The current run-rate of roughly $7 million a year is still above our $5.8 million starting level, which looks much like fiscal 2019 (sales of about $46 million at a 29% gross margin). Growth check: the operating cash earnings grew about 5% in fiscal 2025. The base case starts year one at $5.8 million, about 25% below fiscal 2025, so it assumes no growth, not a rebound. Base case ($37.47 a share): earnings stay at about $5.8 million a year with no growth credited. Florida population growth, demand for affordable housing and the new in-house steel frame shop (making frames since February 2025) are all real, but none of them is secured growth. What keeps the earnings going past year 10 is structural and already in evidence. This is a business operating since 1967 with its own plant and retail real estate that has stayed profitable through a full decade of very different housing markets. The operating business is worth about $97 million. The company owes no debt. Adding about $21.4 million of surplus cash and investments (after setting aside $5 million to run the business, and counting $0.6 million of other investments) gives about $118 million, or $37.47 a share. Bear case ($25.96 a share): the slowdown already visible in the filings (higher mortgage rates, weaker affordability, falling Florida shipments, a shift toward lower-margin dealer sales, labor shortages at the plant) deepens into a four-year downturn. Earnings fall to $3.0 million, then $1.5 million for two years, then $3.0 million. After that they settle at $4.0 million, close to the fiscal 2016 to 2018 level. Earlier downturns did produce real losses: the company was still using up tax-loss carryforwards in fiscal 2015. Florida weather risk (hurricanes, flooding) is disclosed but not modeled as a specific event. The business is worth about $61 million. With no debt and the same $21.4 million of surplus cash, that is $82 million, or $25.96 a share. Bull case ($50.57 a share): earnings hold at the current run-rate of about $7.0 million. Price increases keep passing through input-cost inflation at about 2.5% a year for ten years. The average retail home price rose from $150,219 to $158,231 in fiscal 2025 even as units fell. Earnings then hold flat. The business is worth about $138 million, plus $21.4 million of surplus cash, about $160 million or $50.57 a share. We did not count margin gains from the frame shop or any recovery in unit volumes. Accounting judgements: gains on asset sales are excluded. Stock compensation is charged as a cost. Cash surrender value of company-owned life insurance (about $5.0 million) is left out of the surplus assets, which makes all three cases slightly conservative. Diluted shares fell from about 4.02 million in fiscal 2016 to about 3.16 million through steady buybacks, including 100,000 shares bought for $2.97 million in early fiscal 2026. The company declared $1.50 a share of dividends in fiscal 2026. Change from our previous analysis: we previously valued the shares at $12.30 / $23.00 / $38.70. That analysis started from a single year's cash flow distorted by customer-deposit swings and used higher discount rates. It also counted only the cash balance and not the roughly $12 million of certificates of deposit. This analysis uses a multi-year median, a single 6% discount rate, and the full cash and investment position. It also takes the interest income out of the operating earnings and assumes no growth in the base case where the earlier analysis assumed 4% a year. Margin-of-safety price: the margin-of-safety price is $22. That is below even the bear-case value of about $26, which already assumes a multi-year housing downturn, and the company carries no debt that could force a bad outcome. If the shares moved to the base-case value over about three years, the base case implies roughly 24% a year from $22 including the $1.50 annual dividend. The shares trade over the counter, so it could take years for the price to reflect value. That is why the price is set below what a three-year base-case convergence alone would justify. What would make this wrong: a downturn longer or deeper than the bear case, such as a repeat of the losses that built the earlier tax-loss carryforwards; a storm that shuts the company's single plant in Ocala (a risk the company itself lists); or management spending the cash pile on something other than the business, dividends and buybacks.