After merging with CalAtlantic in February 2018, Lennar Corporation (LEN) has become the largest public homebuilder by revenue in the United States. The company’s homebuilding operations target first-time, move-up, and active adult homebuyers mainly under the Lennar brand name.
The company is benefiting from cost control and a focus on making its homebuilding platform more efficient. LEN is seeing higher demand for new homes due to declining mortgage rates and low inventory. The company has also lifted its average selling price and margin expectation for fiscal 2021.
As of the most recent quarter, the company had a quick ratio of 3.9 which indicates it has more than enough liquidity. From a growth standpoint, LEN has grown earnings by an average of 23.7% per year over the past five years.
Analysts expect earnings to rise 54.7% year over year in the current quarter. The stock appears undervalued based on its trailing P/E of 9.79. The stock showed bullish momentum from November to May, then fell over the next couple months only to recover this summer. This is evident in the chart below.
Take a look at the 1-year chart of LEN below with added notations:
Chart of LEN provided by TradingView
Since its November 2020 to April 2021 rally, LEN has struggled to get past the $110 resistance level (red line). That level is also preventing the stock from reaching new 52-week highs. LEN is falling back from the $110 now, but a reversal should be monitored for a potential breakout.
The ideal long position on the stock would be on a breakout above the $110 level, with a protective stop placed below the entry point.
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LEN shares fell $2.37 (-2.27%) in premarket trading Wednesday. Year-to-date, LEN has gained 36.05%, versus a 21.46% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp
I am an expert stock market coach having helped over 4000 beginner and advanced traders & investors from around the world take control of their financial futures. I also write stock market related articles for the Adam Mesh Trading Group and Yolo Publishing. More...
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