TRI Pointe Group (NYSE: TPH) and Lyon William Homes (NYSE:WLH) are both residential builders – single homes companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, profitability, valuation, dividends, analyst recommendations and risk.

Profitability

This table compares TRI Pointe Group and Lyon William Homes’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
TRI Pointe Group 6.97% 9.32% 4.62%
Lyon William Homes 3.61% 9.33% 3.58%

Valuation & Earnings

This table compares TRI Pointe Group and Lyon William Homes’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
TRI Pointe Group $2.40 billion 1.12 $195.17 million $1.10 16.24
Lyon William Homes $1.41 billion 0.65 $59.69 million $1.53 18.63

TRI Pointe Group has higher revenue and earnings than Lyon William Homes. TRI Pointe Group 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.

Institutional & Insider Ownership

98.7% of Lyon William Homes shares are held by institutional investors. 9.4% of TRI Pointe Group shares are held by company insiders. Comparatively, 22.3% of Lyon William Homes shares are held 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.

Volatility and Risk

TRI Pointe Group has a beta of 1.75, indicating that its stock price is 75% more volatile than the S&P 500. Comparatively, Lyon William Homes has a beta of 1.79, indicating that its stock price is 79% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current recommendations for TRI Pointe Group and Lyon William Homes, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
TRI Pointe Group 0 4 5 0 2.56
Lyon William Homes 0 2 2 0 2.50

TRI Pointe Group presently has a consensus target price of $16.75, suggesting a potential downside of 6.22%. Lyon William Homes has a consensus target price of $27.25, suggesting a potential downside of 4.39%. Given Lyon William Homes’ higher probable upside, analysts clearly believe Lyon William Homes is more favorable than TRI Pointe Group.

Summary

TRI Pointe Group beats Lyon William Homes on 8 of the 14 factors compared between the two stocks.

TRI Pointe Group Company Profile

TRI Pointe Group, Inc. is a homebuilder company. The Company’s operations are organized in two principal businesses, including homebuilding and financial services. Its homebuilding operation consists of six segments: Maracay Homes, including operations in Arizona; Pardee Homes, consisting of operations in California and Nevada; Quadrant Homes, consisting of operations in Washington; Trendmaker Homes, consisting of operations in Texas; TRI Pointe Homes, consisting of operations in California and Colorado, and Winchester Homes, consisting of operations in Maryland and Virginia. Its financial services operation (TRI Pointe Solutions) includes mortgage financing operations and title services operations. Its mortgage financing operation (TRI Pointe Connect) provides mortgage financing to its homebuyers in all of its operated markets. Its title services operation (TRI Pointe Assurance) provides title examinations for its homebuyers in its Trendmaker Homes and Winchester Homes brands.

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.

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