William Lyon Homes (WLH) & Lennar (LEN) Critical Survey

William Lyon Homes (NYSE: WLH) and Lennar (NYSE:LEN) are both construction companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, analyst recommendations, valuation, earnings, institutional ownership, profitability and dividends.

Risk & Volatility

William Lyon Homes has a beta of 1.81, meaning that its share price is 81% more volatile than the S&P 500. Comparatively, Lennar has a beta of 1.35, meaning that its share price is 35% more volatile than the S&P 500.

Profitability

This table compares William Lyon Homes and Lennar’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
William Lyon Homes 3.61% 9.33% 3.58%
Lennar 6.65% 12.37% 5.60%

Valuation & Earnings

This table compares William Lyon Homes and Lennar’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
William Lyon Homes $1.41 billion 0.69 $59.69 million $1.53 19.94
Lennar $10.95 billion 1.39 $911.84 million $3.47 18.69

Lennar has higher revenue and earnings than William Lyon Homes. Lennar is trading at a lower price-to-earnings ratio than William Lyon Homes, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of recent ratings and target prices for William Lyon Homes and Lennar, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
William Lyon Homes 0 2 2 0 2.50
Lennar 0 8 8 0 2.50

William Lyon Homes currently has a consensus target price of $29.25, suggesting a potential downside of 4.13%. Lennar has a consensus target price of $59.79, suggesting a potential downside of 7.80%. Given William Lyon Homes’ higher probable upside, research analysts clearly believe William Lyon Homes is more favorable than Lennar.

Insider & Institutional Ownership

98.2% of William Lyon Homes shares are held by institutional investors. Comparatively, 81.3% of Lennar shares are held by institutional investors. 22.3% of William Lyon Homes shares are held by company insiders. Comparatively, 12.2% of Lennar shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Dividends

Lennar pays an annual dividend of $0.16 per share and has a dividend yield of 0.2%. William Lyon Homes does not pay a dividend. Lennar pays out 4.6% of its earnings in the form of a dividend.

Summary

Lennar beats William Lyon Homes on 9 of the 15 factors compared between the two stocks.

William Lyon Homes Company Profile

William Lyon Homes is primarily engaged in the design, construction and sale of single family detached and attached homes in California, Arizona and Nevada. The Company conducts its homebuilding operations through four reportable operating segments: Southern California, Northern California, Arizona and Nevada. For the three months ended March 31, 2012, 37% of home closings were derived from the Company’s California operations. The Company designs, constructs and sells a range of homes designed to meet the needs of each of its markets, although it primarily focuses sales to the entry-level and first time move-up home buyer markets. During the year ended December 31, 2011, the Company marketed its homes through 19 sales locations. In October 2013, the Company purchase 221 homesites at the master-planned Southshore community in Aurora, Colorado.

Lennar Company Profile

Lennar Corporation is a provider of real estate related financial services, commercial real estate, investment management and finance company. The Company is a homebuilder that operates in various states. Its segments include Homebuilding East, Homebuilding Central, Homebuilding West, Lennar Financial Services, Rialto and Lennar Multifamily. It is a developer of multifamily rental properties. Its Homebuilding operations include the construction and sale of single-family attached and detached homes, as well as the purchase, development and sale of residential land. It operates primarily under the Lennar brand name. The Lennar Financial Services segment includes mortgage financing, title insurance and closing services for both buyers of its homes and others. The Rialto segment is a real estate, investment management, and finance company. The Lennar Multifamily segment focuses on developing a portfolio of institutional multifamily rental properties in the United States markets.

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