CalAtlantic Group (CAA) vs. Lennar Corporation (LEN.B) Critical Contrast

CalAtlantic Group (NYSE: CAA) and Lennar Corporation (NYSE:LEN.B) are both mid-cap construction companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, dividends, analyst recommendations, profitability, risk, earnings and valuation.

Volatility & Risk

CalAtlantic Group has a beta of 1.45, indicating that its stock price is 45% more volatile than the S&P 500. Comparatively, Lennar Corporation has a beta of 1.28, indicating that its stock price is 28% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings for CalAtlantic Group and Lennar Corporation, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CalAtlantic Group 1 6 5 0 2.33
Lennar Corporation 0 0 0 0 N/A

CalAtlantic Group presently has a consensus target price of $40.22, suggesting a potential upside of 14.46%.

Dividends

CalAtlantic Group pays an annual dividend of $0.16 per share and has a dividend yield of 0.5%. Lennar Corporation pays an annual dividend of $0.16 per share. CalAtlantic Group pays out 4.5% of its earnings in the form of a dividend. Lennar Corporation pays out 4.7% 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. CalAtlantic Group is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

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

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
CalAtlantic Group $6.67 billion 0.58 $792.59 million $3.59 9.79
Lennar Corporation N/A N/A N/A $3.42 N/A

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

Institutional & Insider Ownership

97.8% of CalAtlantic Group shares are held by institutional investors. Comparatively, 3.2% of Lennar Corporation shares are held by institutional investors. 39.5% of CalAtlantic Group shares are held by insiders. Comparatively, 15.0% of Lennar Corporation shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares CalAtlantic Group and Lennar Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
CalAtlantic Group 7.26% 11.40% 5.51%
Lennar Corporation 6.78% 12.57% 5.69%

Summary

CalAtlantic Group beats Lennar Corporation on 9 of the 12 factors compared between the two stocks.

CalAtlantic Group Company Profile

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.

Lennar Corporation 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.

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