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.

LEN Chart

LEN data by YCharts


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

Lennar Corp Valuation – November 2016 $LEN
6 Best Stocks For Value Investors This Week – 5/14/16
Lennar Corporation Valuation – May 2016 $LEN
12 Best Stocks For Value Investors This Week – 11/14/15
Lennar Corporation Valuation – November 2015 Update $LEN

Other ModernGraham posts about related companies

Vulcan Materials Co Valuation – April 2018 $VMC
PulteGroup Inc Valuation – March 2018 $PHM
Sherwin-Williams Co Valuation – March 2018 $SHW
Cummins Inc Valuation – March 2018 $CMI
Johnson Controls International PLC Valuation – March 2018 $JCI
Flowserve Corp Valuation – February 2018 $FLS
Corning Inc Valuation – February 2018 $GLW
Home Depot Inc Valuation – February 2018 $HD
Caterpillar Inc Valuation – February 2018 $CAT
Eagle Materials Inc Valuation – Initial Coverage $EXP


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.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.