NEW YORK ( TheStreet) -- Lennar Corporation (NYSE: LEN.B) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity. Highlights from the ratings report include:
- The revenue growth greatly exceeded the industry average of 23.0%. Since the same quarter one year prior, revenues rose by 10.8%. 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.
- LENNAR CORP's earnings per share declined by 5.9% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, LENNAR CORP reported lower earnings of $0.48 versus $0.50 in the prior year. This year, the market expects an improvement in earnings ($0.71 versus $0.48).
- 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 decreased by 5.5% when compared to the same quarter one year ago, dropping from $32.03 million to $30.28 million.
- After a year of stock price fluctuations, the net result is that LEN.B's price has not changed very much. Although its weak earnings growth may have played a role in this flat result, don't lose sight of the fact that the performance of the overall market, as measured by the S&P 500 Index, was essentially similar. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- The gross profit margin for LENNAR CORP is rather low; currently it is at 18.50%. Regardless of LEN.B's low profit margin, it has managed to increase from the same period last year.