Financial Analysis: Lennar (NYSE:LEN) versus LGI Homes (NASDAQ:LGIH)

Lennar (NYSE:LEN) and LGI Homes (NASDAQ:LGIH) are both consumer discretionary companies, but which is the superior business? We will compare the two companies based on the strength of their valuation, dividends, institutional ownership, analyst recommendations, risk, profitability and earnings.

Earnings and Valuation

This table compares Lennar and LGI Homes”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Lennar	$34.19 billion	0.58	$2.08 billion	$5.29	15.89
LGI Homes	$1.72 billion	0.57	$72.55 million	$3.05	13.74

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

Volatility and Risk

Lennar has a beta of 1.36, indicating that its share price is 36% more volatile than the S&P 500. Comparatively, LGI Homes has a beta of 1.88, indicating that its share price is 88% more volatile than the S&P 500.

Profitability

This table compares Lennar and LGI Homes’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Lennar	4.09%	6.15%	4.00%
LGI Homes	4.05%	3.75%	2.02%

Insider & Institutional Ownership

81.1% of Lennar shares are owned by institutional investors. Comparatively, 84.9% of LGI Homes shares are owned by institutional investors. 10.1% of Lennar shares are owned by insiders. Comparatively, 12.6% of LGI Homes shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of current ratings and price targets for Lennar and LGI Homes, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Lennar	11	7	1	0	1.47
LGI Homes	2	1	2	0	2.00

Lennar currently has a consensus target price of $78.87, indicating a potential downside of 6.16%. LGI Homes has a consensus target price of $68.00, indicating a potential upside of 62.25%. Given LGI Homes’ stronger consensus rating and higher possible upside, analysts plainly believe LGI Homes is more favorable than Lennar.

Summary

Lennar beats LGI Homes on 8 of the 14 factors compared between the two stocks.

About Lennar

Lennar Corporation is a U.S. homebuilder that designs, builds and sells homes in communities across many major housing markets in the country. Its offerings include single-family homes and townhomes, with options and designs aimed at a range of homebuyers. The company also provides services that support home purchases, including mortgage financing and title and closing services. Lennar traces its roots to a homebuilding business founded in Miami in 1954 and has expanded its operations across the United States.

About LGI Homes

LGI Homes, Inc. is a residential homebuilder headquartered in The Woodlands, Texas. Founded in 2003, the company develops and sells newly built homes, including single-family houses and townhomes, in planned communities. Its homes are marketed to a range of buyers, including first-time buyers and households seeking larger homes. The company operates under the LGI Homes and Terrata Homes brands, offering homes across markets in multiple U.S. states. Its communities feature a variety of home designs and locations, with offerings that vary by market.