Critical Comparison: Lennar (NYSE:LEN.B) versus D.R. Horton (NYSE:DHI)

Lennar (NYSE:LEN.B) and D.R. Horton (NYSE:DHI) are both large-cap construction companies, but which is the better investment? We will compare the two companies based on the strength of their dividends, risk, institutional ownership, earnings, analyst recommendations, profitability and valuation.

Profitability

This table compares Lennar and D.R. Horton’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Lennar	6.08%	9.27%	6.05%
D.R. Horton	9.95%	13.51%	9.38%

Earnings and Valuation

This table compares Lennar and D.R. Horton”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Lennar	$34.19 billion	0.79	$2.08 billion	$12.09	9.00
D.R. Horton	$34.25 billion	1.39	$3.59 billion	$11.01	14.91

D.R. Horton has higher revenue and earnings than Lennar. Lennar is trading at a lower price-to-earnings ratio than D.R. Horton, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

3.3% of Lennar shares are held by institutional investors. Comparatively, 90.6% of D.R. Horton shares are held by institutional investors. 15.0% of Lennar shares are held by company insiders. Comparatively, 0.7% of D.R. Horton shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Dividends

Lennar pays an annual dividend of $2.00 per share and has a dividend yield of 1.8%. D.R. Horton pays an annual dividend of $1.80 per share and has a dividend yield of 1.1%. Lennar pays out 16.5% of its earnings in the form of a dividend. D.R. Horton pays out 16.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. D.R. Horton has raised its dividend for 10 consecutive years.

Analyst Ratings

This is a summary of recent recommendations and price targets for Lennar and D.R. Horton, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Lennar	0	0	0	0	0.00
D.R. Horton	4	8	4	0	2.00

D.R. Horton has a consensus price target of $160.29, indicating a potential downside of 2.35%. Given D.R. Horton’s stronger consensus rating and higher possible upside, analysts clearly believe D.R. Horton is more favorable than Lennar.

Volatility & Risk

Lennar has a beta of 1.36, suggesting that its stock price is 36% more volatile than the S&P 500. Comparatively, D.R. Horton has a beta of 1.44, suggesting that its stock price is 44% more volatile than the S&P 500.

Summary

D.R. Horton beats Lennar on 14 of the 17 factors compared between the two stocks.

About Lennar

Lennar Corporation, together with its subsidiaries, operates as a homebuilder primarily under the Lennar brand in the United States. It operates through Homebuilding East, Homebuilding Central, Homebuilding Texas, Homebuilding West, Financial Services, Multifamily, and Lennar Other segments. The company's 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 primarily sells single-family attached and detached homes in communities targeted to first-time, move-up, active adult, and luxury homebuyers. The company also offers residential mortgage financing, title insurance, and closing services for home buyers and others. In addition, it involves in the fund investment activity; and originates and sells into securitizations commercial mortgage loans. Further, the company develops, constructs, and manages multifamily rental properties. Lennar Corporation was founded in 1954 and is based in Miami, Florida.

About D.R. Horton

D.R. Horton, Inc. operates as a homebuilding company in East, North, Southeast, South Central, Southwest, and Northwest regions in the United States. It engages in the acquisition and development of land; and construction and sale of residential homes in 118 markets across 33 states under the names of D.R. Horton, America’s Builder, Express Homes, Emerald Homes, and Freedom Homes. The company constructs and sells single-family detached homes; and attached homes, such as townhomes, duplexes, and triplexes. It also provides mortgage financing services; and title insurance policies, and examination and closing services, as well as engages in the residential lot development business. In addition, the company develops, constructs, owns, leases, and sells multi-family and single-family rental properties; and owns non-residential real estate, including ranch land and improvements. It primarily serves homebuyers. D.R. Horton, Inc. was founded in 1978 and is headquartered in Arlington, Texas.