With a daily loss of -3.94 %, a 3-month gain of 2.88%, and an Earnings Per Share (EPS) of 14.65, Lennar Corp (LEN, Financial) presents an intriguing case for valuation analysis. Is the stock Fairly Valued? This article aims to answer this question and provide an in-depth analysis of the company's financials and market position. We encourage you to read on for a comprehensive understanding of Lennar's intrinsic value.
Company Overview
Lennar Corp (LEN, Financial), the second-largest public homebuilder in the United States, primarily targets first-time, move-up, and active adult homebuyers. Besides homebuilding, Lennar also offers mortgage financing and related services to its homebuyers and is involved in multifamily construction. The company also invests in numerous housing-related technology startups.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on historical multiples, a GuruFocus adjustment factor, and future business performance estimates. The GF Value Line on our summary page gives an overview of the fair value that the stock should be traded at.
At its current price of $113.06 per share, Lennar (LEN, Financial) appears to be fairly valued according to the GF Value method. This suggests that the long-term return of its stock is likely to be close to the rate of its business growth.
Financial Strength
Companies with poor financial strength pose a high risk of permanent capital loss. To avoid this, investors must review a company's financial strength before deciding to purchase shares. Factors like the cash-to-debt ratio and interest coverage of a company provide a great insight into its financial strength. Lennar has a cash-to-debt ratio of 0.86, which ranks better than 60.38% of 106 companies in the Homebuilding & Construction industry. The overall financial strength of Lennar is 7 out of 10, indicating it is fair.
Profitability and Growth
Consistent profitability over the long term offers less risk for investors. Lennar has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $33.60 billion and Earnings Per Share (EPS) of $14.65. Its operating margin is 17.43%, which ranks better than 81.65% of 109 companies in the Homebuilding & Construction industry. Overall, the profitability of Lennar is ranked 9 out of 10, indicating strong profitability.
Growth is a crucial factor in the valuation of a company. Lennar's 3-year average revenue growth rate is better than 77.45% of 102 companies in the Homebuilding & Construction industry. Lennar's 3-year average EBITDA growth rate is 43.2%, which ranks better than 78.72% of 94 companies in the Homebuilding & Construction industry.
ROIC Vs WACC
Comparing a company's Return on invested capital (ROIC) to the weighted average cost of capital (WACC) is another method of determining its profitability. For the past 12 months, Lennar's return on invested capital is 14.55, and its cost of capital is 9.91, implying the company is creating value for shareholders.
Conclusion
In summary, the stock of Lennar (LEN, Financial) shows every sign of being fairly valued. The company's financial condition is fair, and its profitability is strong. Its growth ranks better than 78.72% of 94 companies in the Homebuilding & Construction industry. To learn more about Lennar stock, you can check out its 30-Year Financials here.
To find out the high quality companies that may deliver above average returns, please check out GuruFocus High Quality Low Capex Screener.
