Lennar (LEN): An In-depth Analysis of Its Market Value

With a daily gain of 2.02% and a 3-month gain of 10.04%, Lennar Corp (

LEN, Financial) also boasts an Earnings Per Share (EPS) of 14.65. The question that arises, however, is whether the stock is fairly valued. This comprehensive analysis aims to answer that question and provide an in-depth look at Lennar’s valuation.

Company Introduction

Lennar Corp (

LEN, Financial), based in Miami, is the second-largest public homebuilder in the United States, targeting first-time, move-up, and active adult homebuyers. Apart from homebuilding, Lennar offers mortgage financing and related services to its homebuyers and is also involved in multifamily construction. The company has made significant investments in numerous housing-related technology startups.

With a stock price of $118.92 and a GF Value of $117.79, Lennar’s market cap stands at $33.80 billion. This comparison between the stock price and the GF Value provides a snapshot of the company’s fair value and sets the stage for a deeper exploration of Lennar’s valuation.

Understanding GF Value

The GF Value is a proprietary measure that represents the intrinsic value of a stock. It is calculated based on three factors: historical multiples at which the stock has traded, an adjustment factor based on the company’s past performance and growth, and future estimates of business performance. The GF Value Line provides an overview of the fair value at which the stock should ideally be trading.

According to the GF Value, Lennar (

LEN, Financial) is fairly valued. The stock’s fair value is estimated based on historical multiples, an internal adjustment based on past business growth, and analyst estimates of future business performance. If the stock price is significantly above the GF Value Line, the stock may be overvalued and offer poor future returns. Conversely, if the stock price is significantly below the GF Value Line, the stock may be undervalued and offer high future returns.

Given that Lennar is fairly valued, the long-term return of its stock is likely to be close to the rate of its business growth.

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Financial Strength

Before investing in a company, it is crucial to assess its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. The cash-to-debt ratio and interest coverage can provide insights into a company’s financial strength. Lennar has a cash-to-debt ratio of 0.86, better than 58.88% of companies in the Homebuilding & Construction industry. Its overall financial strength is rated 7 out of 10, indicating fair financial health.

Profitability and Growth

Companies that have consistently been profitable over the long term typically offer less risk for investors. Lennar has been profitable 10 out of the past 10 years. With a revenue of $33.60 billion over the past twelve months and an Earnings Per Share (EPS) of $14.65, its operating margin is 17.43%, ranking better than 80.91% of companies in the Homebuilding & Construction industry. Lennar’s profitability is ranked 10 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 76.7% of companies in the Homebuilding & Construction industry. Its 3-year average EBITDA growth rate is 43.2%, ranking better than 79.17% of companies in the industry. This indicates that Lennar’s growth is robust.

ROIC vs WACC

Comparing a company’s return on invested capital (ROIC) to its weighted average cost of capital (WACC) can help evaluate its profitability. ROIC measures how well a company generates cash flow relative to the capital it has invested in its business, while WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If ROIC exceeds WACC, the company is likely creating value for its shareholders. In the past 12 months, Lennar’s ROIC was 14.55 while its WACC came in at 9.52.

Conclusion

In conclusion, Lennar’s stock is believed to be fairly valued. The company’s financial condition is fair, its profitability is strong, and its growth ranks better than 79.17% of companies in the Homebuilding & Construction industry. For more information about Lennar stock, you can check out its 30-Year Financials here.

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