Lyon William Homes (WLH) versus Lennar (LEN.B) Critical Review

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

Volatility & Risk

Lyon William 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 1.36, meaning that its share price is 36% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings for Lyon William Homes and Lennar, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Lyon William Homes 0 2 2 0 2.50
Lennar 0 0 0 0 N/A

Lyon William Homes currently has a consensus target price of $27.25, suggesting a potential downside of 5.02%. Given Lyon William Homes’ higher possible upside, equities analysts clearly believe Lyon William Homes is more favorable than Lennar.

Dividends

Lennar pays an annual dividend of $0.16 per share and has a dividend yield of 0.3%. Lyon William Homes does not pay a dividend. Lennar pays out 4.7% of its earnings in the form of a dividend.

Valuation and Earnings

This table compares Lyon William 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
Lyon William Homes $1.41 billion 0.65 $59.69 million $1.53 18.75
Lennar $10.95 billion 1.08 $911.84 million $3.40 14.47

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

Insider & Institutional Ownership

98.1% of Lyon William Homes shares are owned by institutional investors. Comparatively, 3.2% of Lennar shares are owned by institutional investors. 22.3% of Lyon William Homes shares are owned by company insiders. Comparatively, 15.0% of Lennar shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

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

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

Summary

Lennar beats Lyon William Homes on 8 of the 15 factors compared between the two stocks.

Lyon William 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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