PulteGroup (PHM) & Taylor Morrison Home (TMHC) Critical Review

PulteGroup (NYSE: PHM) and Taylor Morrison Home (NYSE:TMHC) are both mid-cap cyclical consumer goods & services companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, valuation, earnings, dividends, risk, analyst recommendations and institutional ownership.

Profitability

This table compares PulteGroup and Taylor Morrison Home’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PulteGroup 7.77% 14.38% 6.53%
Taylor Morrison Home 2.41% 4.18% 2.21%

Valuation & Earnings

This table compares PulteGroup and Taylor Morrison Home’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
PulteGroup $7.67 billion 1.27 $602.70 million $2.04 16.30
Taylor Morrison Home $3.55 billion 0.82 $52.61 million $1.84 13.30

PulteGroup has higher revenue and earnings than Taylor Morrison Home. Taylor Morrison Home is trading at a lower price-to-earnings ratio than PulteGroup, indicating that it is currently the more affordable of the two stocks.

Dividends

PulteGroup pays an annual dividend of $0.36 per share and has a dividend yield of 1.1%. Taylor Morrison Home does not pay a dividend. PulteGroup pays out 17.6% of its earnings in the form of a dividend. PulteGroup has raised its dividend for 3 consecutive years.

Volatility and Risk

PulteGroup has a beta of 1.2, suggesting that its stock price is 20% more volatile than the S&P 500. Comparatively, Taylor Morrison Home has a beta of 1.47, suggesting that its stock price is 47% more volatile than the S&P 500.

Insider & Institutional Ownership

84.5% of PulteGroup shares are owned by institutional investors. Comparatively, 59.1% of Taylor Morrison Home shares are owned by institutional investors. 0.7% of PulteGroup shares are owned by company insiders. Comparatively, 2.4% of Taylor Morrison Home shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for PulteGroup and Taylor Morrison Home, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PulteGroup 2 7 5 0 2.21
Taylor Morrison Home 0 3 1 0 2.25

PulteGroup presently has a consensus target price of $30.10, suggesting a potential downside of 9.47%. Taylor Morrison Home has a consensus target price of $24.00, suggesting a potential downside of 1.92%. Given Taylor Morrison Home’s stronger consensus rating and higher possible upside, analysts clearly believe Taylor Morrison Home is more favorable than PulteGroup.

Summary

PulteGroup beats Taylor Morrison Home on 12 of the 17 factors compared between the two stocks.

PulteGroup Company Profile

PulteGroup, Inc. is a homebuilder in the United States. The Company’s segments include Homebuilding and Financial Services. Its Homebuilding operations are engaged in the acquisition and development of land primarily for residential purposes within the United States and the construction of housing on such land. Its Financial Services operations consist principally of mortgage banking and title operations. The Company conducts its financial services business, through Pulte Mortgage LLC (Pulte Mortgage) and other subsidiaries. Pulte Mortgage arranges financing through the origination of mortgage loans. The Company’s subsidiaries are engaged in the homebuilding business. It offers a product line to meet the needs of homebuyers in its focused markets. Through its brands, which include Centex, Pulte Homes, Del Webb, DiVosta Homes, and John Wieland Homes and Neighborhoods, the Company offers a range of home designs, including single-family detached, townhouses, condominiums and duplexes.

Taylor Morrison Home Company Profile

Taylor Morrison Home Corporation is a homebuilder, which designs, builds and sells single-family detached and attached homes. The Company is also a land developer, with a portfolio of lifestyle and master-planned communities. Its segments include East, which includes Atlanta, Charlotte, North Florida, Raleigh, Southwest Florida and Tampa; Central, which includes Austin, Dallas, and Houston (each of the Dallas and Houston markets include both a Taylor Morrison division and a Darling Homes division); West, which includes Bay Area, Chicago, Denver, Phoenix, Sacramento and Southern California, and Mortgage Operations, which includes Taylor Morrison Home Funding, LLC (TMHF) and Inspired Title Services, LLC (Inspired Title). It operates under the Taylor Morrison and Darling Homes brand names. The Company also provides financial services to customers through its mortgage subsidiary, TMHF, and title insurance and closing settlement services through its title company, Inspired Title.

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