LGI Homes (NASDAQ: LGIH) and Toll Brothers (NYSE:TOL) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, dividends, analyst recommendations, risk, profitabiliy, valuation and earnings.

Insider & Institutional Ownership

87.7% of LGI Homes shares are held by institutional investors. Comparatively, 80.4% of Toll Brothers shares are held by institutional investors. 13.6% of LGI Homes shares are held by company insiders. Comparatively, 8.8% of Toll Brothers shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Dividends

Toll Brothers pays an annual dividend of $0.32 per share and has a dividend yield of 0.8%. LGI Homes does not pay a dividend. Toll Brothers pays out 13.2% of its earnings in the form of a dividend.

Analyst Ratings

This is a summary of recent recommendations and price targets for LGI Homes and Toll Brothers, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
LGI Homes 0 3 0 0 2.00
Toll Brothers 1 6 8 0 2.47

LGI Homes presently has a consensus target price of $34.00, suggesting a potential downside of 28.93%. Toll Brothers has a consensus target price of $39.27, suggesting a potential downside of 1.15%. Given Toll Brothers’ stronger consensus rating and higher probable upside, analysts clearly believe Toll Brothers is more favorable than LGI Homes.

Risk & Volatility

LGI Homes has a beta of 0.07, suggesting that its share price is 93% less volatile than the S&P 500. Comparatively, Toll Brothers has a beta of 1.52, suggesting that its share price is 52% more volatile than the S&P 500.

Earnings and Valuation

This table compares LGI Homes and Toll Brothers’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
LGI Homes $838.77 million 1.23 $111.56 million $3.35 14.28
Toll Brothers $5.41 billion 1.20 $507.09 million $2.43 16.35

Toll Brothers has higher revenue and earnings than LGI Homes. LGI Homes is trading at a lower price-to-earnings ratio than Toll Brothers, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares LGI Homes and Toll Brothers’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
LGI Homes 8.95% 22.09% 9.51%
Toll Brothers 7.67% 9.71% 4.33%

About LGI Homes

LGI Homes, Inc. is a homebuilder and land developer. The Company is engaged in the design, construction, marketing and sale of new homes in markets in Texas, Arizona, Florida, Georgia, New Mexico, South Carolina, North Carolina, Colorado, Washington and Tennessee. The Company operates through five segments: the Texas division, the Southwest division, the Southeast division, the Florida division and the Northwest division. The Texas division includes homebuilding operations in Houston, Dallas/Fort Worth, San Antonio and Austin locations. The Southwest division includes homebuilding operations in Phoenix, Tucson, Albuquerque, Denver and Colorado Springs locations. The Southeast division includes homebuilding operations in Atlanta, Charlotte and Nashville locations. The Florida division includes homebuilding operations in Tampa, Orlando, Fort Myers and Jacksonville locations. The Northwest division includes homebuilding operations in Seattle location.

About Toll Brothers

Toll Brothers, Inc. is engaged in designing, building, marketing, selling and arranging financing for detached and attached homes in luxury residential communities. The Company operates through two segments: Traditional Home Building and Toll Brothers City Living (City Living). Within the Traditional Home Building segment, it operates in five geographic segments in the United States: the North, consisting of Connecticut, Illinois, Massachusetts, Michigan, Minnesota, New Jersey and New York; the Mid-Atlantic, consisting of Delaware, Maryland, Pennsylvania and Virginia; the South, consisting of Florida, North Carolina and Texas; the West, consisting of Arizona, Colorado, Nevada and Washington, and California. City Living is the Company’s urban development division. Its products include Traditional Home Building Product and City Living Product. Its Traditional Home Building Product includes detached homes, move-up, executive, estate, and active-adult and age-qualified lines of home.

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