Lennar Corporation (NYSE: LEN.B) and Meritage Corporation (NYSE:MTH) are both construction companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, dividends, profitabiliy, institutional ownership, risk, analyst recommendations and valuation.

Profitability

This table compares Lennar Corporation and Meritage Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Lennar Corporation 6.78% 12.57% 5.69%
Meritage Corporation 4.90% 10.94% 5.30%

Dividends

Lennar Corporation pays an annual dividend of $0.16 per share. Meritage Corporation does not pay a dividend. Lennar Corporation pays out 4.7% of its earnings in the form of a dividend.

Insider & Institutional Ownership

3.2% of Lennar Corporation shares are owned by institutional investors. Comparatively, 97.7% of Meritage Corporation shares are owned by institutional investors. 15.0% of Lennar Corporation shares are owned by insiders. Comparatively, 5.6% of Meritage Corporation shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares Lennar Corporation and Meritage Corporation’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Lennar Corporation N/A N/A N/A $3.42 N/A
Meritage Corporation $3.12 billion 0.55 $238.33 million $3.61 11.76

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

Volatility and Risk

Lennar Corporation has a beta of 1.28, indicating that its stock price is 28% more volatile than the S&P 500. Comparatively, Meritage Corporation has a beta of 1.48, indicating that its stock price is 48% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and target prices for Lennar Corporation and Meritage Corporation, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Lennar Corporation 0 0 0 0 N/A
Meritage Corporation 2 8 1 0 1.91

Meritage Corporation has a consensus target price of $39.39, suggesting a potential downside of 7.21%.

Summary

Meritage Corporation beats Lennar Corporation on 6 of the 11 factors compared between the two stocks.

About Lennar Corporation

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.

About Meritage Corporation

Meritage Homes Corporation operates as a holding company. The Company is a designer and builder of single-family homes. The Company operates through two segments: homebuilding and financial services. The homebuilding segment is engaged in the business of acquiring and developing land, constructing homes, marketing and selling those homes, and providing warranty and customer services. It builds homes in the regions of the United States and offers a range of homes that are designed for a range of homebuyers, including first-time, move-up, active adult and luxury. As of December 31, 2016, it had homebuilding operations in three regions: West, Central and East, which were consisted of nine states: Arizona, California, Colorado, Texas, Florida, Georgia, North Carolina, South Carolina and Tennessee. It also operates Carefree Title Agency, Inc. (Carefree Title) company. Carefree Title’s core business includes title insurance and closing/settlement services it offers to its homebuyers.

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