Reviewing Lennar (LEN) and Gafisa (GFA)

Lennar (NYSE: LEN) and Gafisa (NYSE:GFA) are both construction companies, but which is the superior stock? We will contrast the two businesses based on the strength of their analyst recommendations, institutional ownership, earnings, valuation, profitability, risk and dividends.

Risk and Volatility

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Lennar has a beta of 1.23, meaning that its share price is 23% more volatile than the S&P 500. Comparatively, Gafisa has a beta of 2.09, meaning that its share price is 109% more volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and price targets for Lennar and Gafisa, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Lennar 0 3 15 0 2.83
Gafisa 3 0 0 0 1.00

Lennar currently has a consensus target price of $71.64, indicating a potential upside of 26.91%. Given Lennar’s stronger consensus rating and higher probable upside, research analysts plainly believe Lennar is more favorable than Gafisa.

Dividends

Lennar pays an annual dividend of $0.16 per share and has a dividend yield of 0.3%. Gafisa pays an annual dividend of $0.59 per share and has a dividend yield of 8.1%. Lennar pays out 4.2% of its earnings in the form of a dividend.

Profitability

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

Net Margins Return on Equity Return on Assets
Lennar 6.84% 11.65% 5.26%
Gafisa -138.50% -39.31% -12.72%

Valuation & Earnings

This table compares Lennar and Gafisa’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Lennar $12.65 billion 1.07 $810.48 million $3.81 14.82
Gafisa $190.80 million 0.54 -$266.17 million N/A N/A

Lennar has higher revenue and earnings than Gafisa.

Insider and Institutional Ownership

88.7% of Lennar shares are owned by institutional investors. Comparatively, 5.9% of Gafisa shares are owned by institutional investors. 8.5% of Lennar shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Summary

Lennar beats Gafisa on 11 of the 14 factors compared between the two stocks.

Lennar Company Profile

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.

Gafisa Company Profile

Gafisa S.A. operates as a homebuilder in Brazil. The company develops residential units, such as luxury buildings with swimming pools, gyms, visitor parking, and other amenities for upper-income customers; buildings for middle-income customers; and entry-level buildings and house units for lower-income customers. Gafisa S.A. also develops residential land subdivisions for sale; and provides construction services to third parties, and technical and real estate management services. The company was incorporated in 1996 and is headquartered in São Paulo, Brazil.

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