Lennar Corp Valuation – April 2018 $LEN
Company Profile (excerpt from Reuters): Lennar Corporation, incorporated on September 6, 1991, 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. The Company delivered 26,563 new homes as of November 30, 2016. The Company’s segments include Homebuilding East, Homebuilding Central, Homebuilding West, Lennar Financial Services, Rialto and Lennar Multifamily. The Company 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.
Downloadable PDF version of this valuation:
ModernGraham Valuation of LEN – April 2018
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
What kind of Intelligent Investor are you?
| Defensive Investor; must pass 6 out of the following 7 tests. | ||||
| 1. Adequate Size of the Enterprise | Market Cap > $2Bil | $18,312,413,895 | Pass | |
| 2. Sufficiently Strong Financial Condition | Current Ratio > 2 | 15.97 | Pass | |
| 3. Earnings Stability | Positive EPS for 10 years prior | Fail | ||
| 4. Dividend Record | Dividend Payments for 10 years prior | Pass | ||
| 5. Earnings Growth | Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end | -900.14% | Fail | |
| 6. Moderate PEmg Ratio | PEmg < 20 | 15.50 | Pass | |
| 7. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 1.12 | Pass | |
| Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor. | ||||
| 1. Sufficiently Strong Financial Condition | Current Ratio > 1.5 | 15.97 | Pass | |
| 2. Sufficiently Strong Financial Condition | Debt to NCA < 1.1 | 0.61 | Pass | |
| 3. Earnings Stability | Positive EPS for 5 years prior | Pass | ||
| 4. Dividend Record | Currently Pays Dividend | Pass | ||
| 5. Earnings Growth | EPSmg greater than 5 years ago | Pass | ||
Stage 2: Determination of Intrinsic Value
| EPSmg | $3.71 |
| MG Growth Estimate | 10.50% |
| MG Value | $109.52 |
| Opinion | Undervalued |
| MG Grade | B- |
| MG Value based on 3% Growth | $53.82 |
| MG Value based on 0% Growth | $31.55 |
| Market Implied Growth Rate | 3.50% |
| Current Price | $57.53 |
| % of Intrinsic Value | 52.53% |
Lennar Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.
As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.18 in 2014 to an estimated $3.71 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.5% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.
At the time of valuation, further research into Lennar Corporation revealed the company was trading above its Graham Number of $55.75. The company pays a dividend of $0.16 per share, for a yield of 0.3% Its PEmg (price over earnings per share – ModernGraham) was 15.5, which was below the industry average of 28.14, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $21.3.
Lennar Corporation performs fairly well in the ModernGraham grading system, scoring a B-.
Stage 3: Information for Further Research
| Net Current Asset Value (NCAV) | $21.30 |
| Graham Number | $55.75 |
| PEmg | 15.50 |
| Current Ratio | 15.97 |
| PB Ratio | 1.12 |
| Current Dividend | $0.16 |
| Dividend Yield | 0.27% |
| Number of Consecutive Years of Dividend Growth | 0 |
Useful Links:
| ModernGraham tagged articles | Morningstar |
| Google Finance | MSN Money |
| Yahoo Finance | Seeking Alpha |
| GuruFocus | SEC Filings |
Most Recent Balance Sheet Figures
| Balance Sheet Information | 2/1/2018 |
| Total Current Assets | $20,302,526,000 |
| Total Current Liabilities | $1,270,902,000 |
| Long-Term Debt | $11,593,659,000 |
| Total Assets | $27,944,023,000 |
| Intangible Assets | $3,644,105,000 |
| Total Liabilities | $14,883,093,000 |
| Shares Outstanding (Diluted Average) | 254,448,000 |
Earnings Per Share History
| EPS History | |
| Next Fiscal Year Estimate | $4.21 |
| Nov2017 | $3.38 |
| Nov2016 | $3.86 |
| Nov2015 | $3.39 |
| Nov2014 | $2.75 |
| Nov2013 | $2.11 |
| Nov2012 | $3.05 |
| Nov2011 | $0.47 |
| Nov2010 | $0.50 |
| Nov2009 | -$2.40 |
| Nov2008 | -$6.87 |
| Nov2007 | -$12.07 |
| Nov2006 | $3.62 |
| Nov2005 | $8.07 |
| Nov2004 | $5.59 |
| Nov2003 | $4.56 |
| Nov2002 | $3.44 |
| Nov2001 | $0.00 |
| Nov2000 | $1.62 |
| Nov1999 | $1.22 |
| Nov1998 | $1.22 |
Earnings Per Share – ModernGraham History
| EPSmg History | |
| Next Fiscal Year Estimate | $3.71 |
| Nov2017 | $3.34 |
| Nov2016 | $3.22 |
| Nov2015 | $2.72 |
| Nov2014 | $2.18 |
| Nov2013 | $1.52 |
| Nov2012 | $0.46 |
| Nov2011 | -$1.91 |
| Nov2010 | -$3.22 |
| Nov2009 | -$4.03 |
| Nov2008 | -$3.34 |
| Nov2007 | -$0.40 |
| Nov2006 | $5.31 |
| Nov2005 | $5.55 |
| Nov2004 | $3.87 |
| Nov2003 | $2.73 |
| Nov2002 | $1.72 |
Recommended Reading:
Other ModernGraham posts about the company
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Disclaimer:
The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.
