Fortune Brands Home & Security (FBHS) versus Lennar (LEN) Critical Review

Fortune Brands Home & Security (NYSE: FBHS) and Lennar (NYSE:LEN) are both industrial products companies, but which is the better investment? We will contrast the two businesses based on the strength of their institutional ownership, profitability, earnings, valuation, risk, dividends and analyst recommendations.

Risk & Volatility

Fortune Brands Home & Security has a beta of 1.42, indicating that its stock price is 42% more volatile than the S&P 500. Comparatively, Lennar has a beta of 1.31, indicating that its stock price is 31% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Fortune Brands Home & Security and Lennar, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Fortune Brands Home & Security 0 6 8 0 2.57
Lennar 0 4 13 0 2.76

Fortune Brands Home & Security presently has a consensus target price of $73.62, indicating a potential upside of 25.00%. Lennar has a consensus target price of $67.93, indicating a potential upside of 15.25%. Given Fortune Brands Home & Security’s higher possible upside, equities analysts plainly believe Fortune Brands Home & Security is more favorable than Lennar.

Valuation & Earnings

This table compares Fortune Brands Home & Security and Lennar’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Fortune Brands Home & Security $5.28 billion 1.69 $472.60 million $3.08 19.12
Lennar $12.65 billion 1.12 $810.48 million $3.81 15.47

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

Institutional & Insider Ownership

88.2% of Fortune Brands Home & Security shares are owned by institutional investors. Comparatively, 88.7% of Lennar shares are owned by institutional investors. 1.7% of Fortune Brands Home & Security shares are owned by company insiders. Comparatively, 8.5% of Lennar shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Dividends

Fortune Brands Home & Security pays an annual dividend of $0.80 per share and has a dividend yield of 1.4%. Lennar pays an annual dividend of $0.16 per share and has a dividend yield of 0.3%. Fortune Brands Home & Security pays out 26.0% of its earnings in the form of a dividend. Lennar pays out 4.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Fortune Brands Home & Security has raised its dividend for 4 consecutive years. Fortune Brands Home & Security is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Fortune Brands Home & Security and Lennar’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Fortune Brands Home & Security 8.95% 18.73% 8.94%
Lennar 6.41% 12.00% 5.30%

Summary

Fortune Brands Home & Security beats Lennar on 9 of the 17 factors compared between the two stocks.

Fortune Brands Home & Security Company Profile

Fortune Brands Home & Security, Inc. is a holding company. The Company operates through four segments. The Cabinets segment includes custom, semi-custom and stock cabinetry for the kitchen, bath and other parts of the home under brand names, including Aristokraft, Mid-Continent, Diamond, Kitchen Classics, Kitchen Craft, Schrock, Omega, Homecrest, Thomasville, StarMark and Ultracraft. The Plumbing segment manufactures or assembles and sells faucets, bath furnishings, accessories and kitchen sinks and waste disposals under the Moen, Riobel, ROHL, Perrin & Rowe, and Waste King brands. The Doors segment includes residential fiberglass and steel entry door systems under the Therma-Tru brand name and urethane millwork product lines under the Fypon brand name. The Security segment includes locks, safety and security devices and electronic security products under the Master Lock brand name and fire resistant safes, security containers and commercial cabinets under the SentrySafe brand name.

Lennar Company Profile

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.

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