Taylor Morrison Home (NYSE: TMHC) and LGI Homes (NASDAQ:LGIH) are both cyclical consumer goods & services companies, but which is the better business? We will contrast the two businesses based on the strength of their risk, institutional ownership, valuation, dividends, analyst recommendations, earnings and profitability.

Institutional and Insider Ownership

59.2% of Taylor Morrison Home shares are held by institutional investors. Comparatively, 92.0% of LGI Homes shares are held by institutional investors. 2.4% of Taylor Morrison Home shares are held by company insiders. Comparatively, 13.6% of LGI Homes shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Taylor Morrison Home and LGI Homes, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Taylor Morrison Home 0 4 1 0 2.20
LGI Homes 0 4 2 0 2.33

Taylor Morrison Home currently has a consensus target price of $23.25, indicating a potential downside of 2.80%. LGI Homes has a consensus target price of $53.00, indicating a potential downside of 24.12%. Given Taylor Morrison Home’s higher possible upside, research analysts clearly believe Taylor Morrison Home is more favorable than LGI Homes.

Profitability

This table compares Taylor Morrison Home and LGI Homes’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Taylor Morrison Home 2.41% 4.18% 2.21%
LGI Homes 9.26% 25.51% 11.10%

Valuation and Earnings

This table compares Taylor Morrison Home and LGI Homes’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Taylor Morrison Home $3.55 billion 0.81 $52.61 million $0.62 38.58
LGI Homes $838.32 million 1.81 $75.03 million $4.31 16.21

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

Risk & Volatility

Taylor Morrison Home has a beta of 1.48, meaning that its share price is 48% more volatile than the S&P 500. Comparatively, LGI Homes has a beta of 0.2, meaning that its share price is 80% less volatile than the S&P 500.

Summary

LGI Homes beats Taylor Morrison Home on 11 of the 14 factors compared between the two stocks.

Taylor Morrison Home Company Profile

Taylor Morrison Home Corporation is a homebuilder, which designs, builds and sells single-family detached and attached homes. The Company is also a land developer, with a portfolio of lifestyle and master-planned communities. Its segments include East, which includes Atlanta, Charlotte, North Florida, Raleigh, Southwest Florida and Tampa; Central, which includes Austin, Dallas, and Houston (each of the Dallas and Houston markets include both a Taylor Morrison division and a Darling Homes division); West, which includes Bay Area, Chicago, Denver, Phoenix, Sacramento and Southern California, and Mortgage Operations, which includes Taylor Morrison Home Funding, LLC (TMHF) and Inspired Title Services, LLC (Inspired Title). It operates under the Taylor Morrison and Darling Homes brand names. The Company also provides financial services to customers through its mortgage subsidiary, TMHF, and title insurance and closing settlement services through its title company, Inspired Title.

LGI Homes Company Profile

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.

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