William Lyon Homes (NYSE: WLH) and CalAtlantic Group (NYSE:CAA) are both cyclical consumer goods & services companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, dividends, earnings, analyst recommendations, profitability, institutional ownership and risk.

Profitability

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

Net Margins Return on Equity Return on Assets
William Lyon Homes 3.61% 9.33% 3.58%
CalAtlantic Group 6.85% 10.35% 5.01%

Dividends

CalAtlantic Group pays an annual dividend of $0.16 per share and has a dividend yield of 0.3%. William Lyon Homes does not pay a dividend. CalAtlantic Group pays out 4.7% of its earnings in the form of a dividend. William Lyon Homes has raised its dividend for 2 consecutive years.

Analyst Ratings

This is a breakdown of recent ratings and target prices for William Lyon Homes and CalAtlantic Group, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
William Lyon Homes 0 3 1 0 2.25
CalAtlantic Group 0 13 1 0 2.07

William Lyon Homes currently has a consensus price target of $33.00, suggesting a potential upside of 4.43%. CalAtlantic Group has a consensus price target of $45.25, suggesting a potential downside of 24.31%. Given William Lyon Homes’ stronger consensus rating and higher probable upside, analysts clearly believe William Lyon Homes is more favorable than CalAtlantic Group.

Earnings & Valuation

This table compares William Lyon Homes and CalAtlantic Group’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
William Lyon Homes $1.41 billion 0.72 $59.69 million $1.53 20.65
CalAtlantic Group $6.39 billion 1.03 $484.73 million $3.37 17.74

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

Institutional & Insider Ownership

98.1% of William Lyon Homes shares are owned by institutional investors. 21.3% of William Lyon Homes shares are owned by company insiders. Comparatively, 39.5% of CalAtlantic Group shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Volatility and Risk

William Lyon Homes has a beta of 2.14, indicating that its share price is 114% more volatile than the S&P 500. Comparatively, CalAtlantic Group has a beta of 1.59, indicating that its share price is 59% more volatile than the S&P 500.

Summary

CalAtlantic Group beats William Lyon Homes on 9 of the 16 factors compared between the two stocks.

About William Lyon Homes

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.

About CalAtlantic Group

CalAtlantic Group, Inc. is a diversified builder of single-family attached and detached homes. The Company operates through two segments: homebuilding and financial services. The homebuilding segment operations include acquiring and developing land, and constructing and selling single-family attached and detached homes. The Financial Services segment includes mortgage financing operation, which provides mortgage financing to its homebuyers in the markets, in which it operates, and sells all of the loans it originates in the secondary mortgage market. As of December 31, 2016, the Company built homes in communities that meet the desires of customers across the homebuilding spectrum, from entry level to luxury, in over 40 metropolitan statistical areas spanning 17 states and the District of Columbia. The Company also provides mortgage, title and escrow services. The Company provides mortgage loans to its homebuyers through its mortgage financing subsidiary, CalAtlantic Mortgage.

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