Taylor Morrison Home (NYSE: TMHC) and LGI Homes (NASDAQ:LGIH) are both construction companies, but which is the better investment? We will compare the two companies based on the strength of their analyst recommendations, valuation, dividends, profitability, earnings, institutional ownership and risk.

Profitability

This table compares Taylor Morrison Home and LGI Homes’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Taylor Morrison Home 2.41% 4.18% 2.21%
LGI Homes 9.26% 25.51% 11.10%

Risk & Volatility

Taylor Morrison Home has a beta of 1.47, meaning that its stock price is 47% more volatile than the S&P 500. Comparatively, LGI Homes has a beta of 0.27, meaning that its stock price is 73% less volatile than the S&P 500.

Valuation and Earnings

This table compares Taylor Morrison Home and LGI Homes’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Taylor Morrison Home $3.55 billion 0.79 $52.61 million $1.84 12.75
LGI Homes $838.32 million 1.83 $75.03 million $4.31 16.35

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

Analyst Recommendations

This is a summary of current ratings and recommmendations for Taylor Morrison Home and LGI Homes, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Taylor Morrison Home 0 3 1 0 2.25
LGI Homes 0 4 2 0 2.33

Taylor Morrison Home presently has a consensus price target of $24.00, indicating a potential upside of 2.30%. LGI Homes has a consensus price target of $53.00, indicating a potential downside of 24.79%. Given Taylor Morrison Home’s higher probable upside, equities research analysts clearly believe Taylor Morrison Home is more favorable than LGI Homes.

Institutional & Insider Ownership

59.2% of Taylor Morrison Home shares are held by institutional investors. Comparatively, 92.0% of LGI Homes shares are held by institutional investors. 2.4% of Taylor Morrison Home shares are held by insiders. Comparatively, 13.6% of LGI Homes shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Summary

LGI Homes beats Taylor Morrison Home on 11 of the 14 factors compared between the two stocks.

Taylor Morrison Home Company Profile

Taylor Morrison Home Corporation is a homebuilder, which designs, builds and sells single-family detached and attached homes. The Company is also a land developer, with a portfolio of lifestyle and master-planned communities. Its segments include East, which includes Atlanta, Charlotte, North Florida, Raleigh, Southwest Florida and Tampa; Central, which includes Austin, Dallas, and Houston (each of the Dallas and Houston markets include both a Taylor Morrison division and a Darling Homes division); West, which includes Bay Area, Chicago, Denver, Phoenix, Sacramento and Southern California, and Mortgage Operations, which includes Taylor Morrison Home Funding, LLC (TMHF) and Inspired Title Services, LLC (Inspired Title). It operates under the Taylor Morrison and Darling Homes brand names. The Company also provides financial services to customers through its mortgage subsidiary, TMHF, and title insurance and closing settlement services through its title company, Inspired Title.

LGI Homes Company Profile

LGI Homes, Inc. is a homebuilder and land developer. The Company is engaged in the design, construction, marketing and sale of new homes in markets in Texas, Arizona, Florida, Georgia, New Mexico, South Carolina, North Carolina, Colorado, Washington and Tennessee. The Company operates through five segments: the Texas division, the Southwest division, the Southeast division, the Florida division and the Northwest division. The Texas division includes homebuilding operations in Houston, Dallas/Fort Worth, San Antonio and Austin locations. The Southwest division includes homebuilding operations in Phoenix, Tucson, Albuquerque, Denver and Colorado Springs locations. The Southeast division includes homebuilding operations in Atlanta, Charlotte and Nashville locations. The Florida division includes homebuilding operations in Tampa, Orlando, Fort Myers and Jacksonville locations. The Northwest division includes homebuilding operations in Seattle location.

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