Reviewing Lennar (NYSE:LEN.B) and PulteGroup (NYSE:PHM)

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

Analyst Ratings

This is a breakdown of recent ratings for Lennar and PulteGroup, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Lennar	0	0	0	0	0.00
PulteGroup	0	4	9	1	2.79

PulteGroup has a consensus target price of $135.3077, indicating a potential upside of 5.04%. Given PulteGroup’s stronger consensus rating and higher possible upside, analysts clearly believe PulteGroup is more favorable than Lennar.

Risk and Volatility

Lennar has a beta of 1.23, meaning that its share price is 23% more volatile than the S&P 500. Comparatively, PulteGroup has a beta of 1.22, meaning that its share price is 22% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Lennar	9.20%	12.73%	8.57%
PulteGroup	15.50%	21.01%	14.73%

Valuation and Earnings

This table compares Lennar and PulteGroup”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Lennar	$35.44 billion	0.92	$3.93 billion	$12.09	10.41
PulteGroup	$17.95 billion	1.42	$3.08 billion	$13.38	9.63

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

Institutional & Insider Ownership

3.3% of Lennar shares are held by institutional investors. Comparatively, 89.9% of PulteGroup shares are held by institutional investors. 15.0% of Lennar shares are held by company insiders. Comparatively, 0.8% of PulteGroup shares are held by company 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.

Dividends

Lennar pays an annual dividend of $2.00 per share and has a dividend yield of 1.6%. PulteGroup pays an annual dividend of $0.88 per share and has a dividend yield of 0.7%. Lennar pays out 16.5% of its earnings in the form of a dividend. PulteGroup pays out 6.6% 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. PulteGroup has raised its dividend for 7 consecutive years.

Summary

PulteGroup beats Lennar on 12 of the 18 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 PulteGroup

PulteGroup, Inc., through its subsidiaries, primarily engages in the homebuilding business in the United States. It acquires and develops land primarily for residential purposes; and constructs housing on such land. The company also offers various home designs, including single-family detached, townhomes, condominiums, and duplexes under the Centex, Pulte Homes, Del Webb, DiVosta Homes, John Wieland Homes and Neighborhoods, and American West brand names. In addition, the company arranges financing through the origination of mortgage loans primarily for homebuyers; sells the servicing rights for the originated loans; and provides title insurance policies, and examination and closing services to homebuyers. PulteGroup, Inc. was founded in 1950 and is headquartered in Atlanta, Georgia.