M/I Homes (MHO) & William Lyon Homes (WLH) Critical Comparison

M/I Homes (NYSE: MHO) and William Lyon Homes (NYSE:WLH) are both small-cap cyclical consumer goods & services companies, but which is the superior business? We will contrast the two businesses based on the strength of their valuation, profitability, dividends, risk, institutional ownership, earnings and analyst recommendations.

Valuation & Earnings

This table compares M/I Homes and William Lyon Homes’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
M/I Homes $1.69 billion 0.60 $56.60 million $2.41 15.32
William Lyon Homes $1.41 billion 0.69 $59.69 million $1.53 20.07

William Lyon Homes has lower revenue, but higher earnings than M/I Homes. M/I Homes is trading at a lower price-to-earnings ratio than William Lyon Homes, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

95.9% of M/I Homes shares are held by institutional investors. Comparatively, 98.2% of William Lyon Homes shares are held by institutional investors. 4.7% of M/I Homes shares are held by company insiders. Comparatively, 22.3% of William Lyon Homes shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current ratings and target prices for M/I Homes and William Lyon Homes, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
M/I Homes 0 1 2 0 2.67
William Lyon Homes 0 3 1 0 2.25

M/I Homes currently has a consensus price target of $39.50, suggesting a potential upside of 6.96%. William Lyon Homes has a consensus price target of $33.00, suggesting a potential upside of 7.49%. Given William Lyon Homes’ higher probable upside, analysts clearly believe William Lyon Homes is more favorable than M/I Homes.

Profitability

This table compares M/I Homes and William Lyon Homes’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
M/I Homes 4.00% 12.31% 4.89%
William Lyon Homes 3.61% 9.33% 3.58%

Risk & Volatility

M/I Homes has a beta of 1.3, indicating that its stock price is 30% more volatile than the S&P 500. Comparatively, William Lyon Homes has a beta of 2.14, indicating that its stock price is 114% more volatile than the S&P 500.

M/I Homes Company Profile

M/I Homes, Inc. is a builder of single-family homes. The Company consists of two operations: homebuilding and financial services. It operates through Midwest homebuilding, Southern homebuilding, Mid-Atlantic homebuilding and financial services operations segments. The Company and its subsidiaries are engaged primarily in the construction and sale of single-family residential homes in 15 markets: Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Chicago, Illinois; Minneapolis/St. Paul, Minnesota; Tampa, Orlando and Sarasota, Florida; Austin, Dallas/Fort Worth, Houston and San Antonio, Texas; Charlotte and Raleigh, North Carolina; and the Virginia and Maryland suburbs of Washington, D.C. The Company’s financial services operations support its homebuilding operations by providing mortgage loans and title services to the customers of its homebuilding operations. It markets and sells homes primarily under the M/I Homes brand (M/I Homes and Showcase Collection (by M/I)).

William Lyon Homes Company Profile

William Lyon Homes is primarily engaged in the design, construction and sale of single family detached and attached homes in California, Arizona and Nevada. The Company conducts its homebuilding operations through four reportable operating segments: Southern California, Northern California, Arizona and Nevada. For the three months ended March 31, 2012, 37% of home closings were derived from the Company’s California operations. The Company designs, constructs and sells a range of homes designed to meet the needs of each of its markets, although it primarily focuses sales to the entry-level and first time move-up home buyer markets. During the year ended December 31, 2011, the Company marketed its homes through 19 sales locations. In October 2013, the Company purchase 221 homesites at the master-planned Southshore community in Aurora, Colorado.

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