NEW YORK (
) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its revenue growth and solid stock price performance. However, as a counter to these strengths, we also find weaknesses including disappointing return on equity, poor profit margins and feeble growth in the company's earnings per share.
Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 42.8%. Since the same quarter one year prior, revenues rose by 29.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Compared to its closing price of one year ago, LEN's share price has jumped by 37.94%, exceeding the performance of the broader market during that same time frame. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- The change in net income from the same quarter one year ago has significantly exceeded that of the Household Durables industry average, but is less than that of the S&P 500. The net income has significantly decreased by 45.4% when compared to the same quarter one year ago, falling from $27.41 million to $14.97 million.
- The gross profit margin for LENNAR CORP is rather low; currently it is at 19.00%. Regardless of LEN's low profit margin, it has managed to increase from the same period last year.
- The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. Compared to other companies in the Household Durables industry and the overall market, LENNAR CORP's return on equity significantly trails that of both the industry average and the S&P 500.
Lennar Corporation, together with its subsidiaries, engages in homebuilding, financial services, and real estate businesses in the United States. The company has a P/E ratio of 55, above the average materials & construction industry P/E ratio of 46.6 and above the S&P 500 P/E ratio of 17.7. Lennar has a market cap of $3.48 billion and is part of the
industry. Shares are up 40.6% year to date as of the close of trading on Wednesday.
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-- Written by a member of TheStreet Ratings Staff