Lennar Corporation (NYSE: LEN) and Meritage Corporation (NYSE:MTH) are both construction companies, but which is the better business? We will compare the two businesses based on the strength of their risk, profitability, earnings, dividends, institutional ownership, analyst recommendations and valuation.

Dividends

Lennar Corporation pays an annual dividend of $0.16 per share and has a dividend yield of 0.3%. Meritage Corporation does not pay a dividend. Lennar Corporation pays out 4.7% of its earnings in the form of a dividend.

Institutional and Insider Ownership

81.1% of Lennar Corporation shares are held by institutional investors. Comparatively, 98.2% of Meritage Corporation shares are held by institutional investors. 12.2% of Lennar Corporation shares are held by company insiders. Comparatively, 5.6% of Meritage Corporation 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.

Earnings & Valuation

This table compares Lennar Corporation and Meritage Corporation’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Lennar Corporation $11.81 billion 0.88 $1.36 billion $3.42 14.92
Meritage Corporation $3.12 billion 0.52 $241.92 million $3.64 11.04

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

Profitability

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

Net Margins Return on Equity Return on Assets
Lennar Corporation 6.78% 12.57% 5.69%
Meritage Corporation 4.94% 10.74% 5.16%

Volatility & Risk

Lennar Corporation has a beta of 1.24, suggesting that its stock price is 24% more volatile than the S&P 500. Comparatively, Meritage Corporation has a beta of 1.46, suggesting that its stock price is 46% more volatile than the S&P 500.

Analyst Ratings

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

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Lennar Corporation 0 8 9 1 2.61
Meritage Corporation 2 6 1 0 1.89

Lennar Corporation currently has a consensus price target of $56.31, suggesting a potential upside of 10.33%. Meritage Corporation has a consensus price target of $40.29, suggesting a potential upside of 0.21%. Given Lennar Corporation’s stronger consensus rating and higher possible upside, research analysts plainly believe Lennar Corporation is more favorable than Meritage Corporation.

Summary

Lennar Corporation beats Meritage Corporation on 13 of the 17 factors compared between the two stocks.

About Lennar Corporation

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.

About Meritage Corporation

Meritage Homes Corporation operates as a holding company. The Company is a designer and builder of single-family homes. The Company operates through two segments: homebuilding and financial services. The homebuilding segment is engaged in the business of acquiring and developing land, constructing homes, marketing and selling those homes, and providing warranty and customer services. It builds homes in the regions of the United States and offers a range of homes that are designed for a range of homebuyers, including first-time, move-up, active adult and luxury. As of December 31, 2016, it had homebuilding operations in three regions: West, Central and East, which were consisted of nine states: Arizona, California, Colorado, Texas, Florida, Georgia, North Carolina, South Carolina and Tennessee. It also operates Carefree Title Agency, Inc. (Carefree Title) company. Carefree Title’s core business includes title insurance and closing/settlement services it offers to its homebuyers.

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