Reviewing M/I Homes (MHO) and William Lyon Homes (WLH)

M/I Homes (NYSE: MHO) and William Lyon Homes (NYSE:WLH) are both small-cap cyclical consumer goods & services companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, analyst recommendations, institutional ownership, risk, valuation, dividends and profitability.

Insider and Institutional Ownership

95.9% of M/I Homes shares are held by institutional investors. Comparatively, 98.2% of William Lyon Homes shares are held by institutional investors. 4.7% of M/I Homes shares are held by insiders. Comparatively, 22.3% of William Lyon Homes shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares M/I Homes and William Lyon Homes’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
M/I Homes $1.69 billion 0.59 $56.60 million $2.41 14.93
William Lyon Homes $1.41 billion 0.69 $59.69 million $1.53 20.05

William Lyon Homes has lower revenue, but higher earnings than M/I Homes. M/I Homes is trading at a lower price-to-earnings ratio than William Lyon Homes, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

M/I Homes has a beta of 1.3, suggesting that its stock price is 30% more volatile than the S&P 500. Comparatively, William Lyon Homes has a beta of 2.14, suggesting that its stock price is 114% more volatile than the S&P 500.

Profitability

This table compares M/I Homes and William Lyon Homes’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
M/I Homes 4.00% 12.31% 4.89%
William Lyon Homes 3.61% 9.33% 3.58%

Analyst Ratings

This is a summary of recent recommendations for M/I Homes and William Lyon Homes, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
M/I Homes 0 1 2 0 2.67
William Lyon Homes 0 3 1 0 2.25

M/I Homes currently has a consensus price target of $39.50, indicating a potential upside of 9.81%. William Lyon Homes has a consensus price target of $33.00, indicating a potential upside of 7.56%. Given M/I Homes’ stronger consensus rating and higher probable upside, equities analysts plainly believe M/I Homes is more favorable than William Lyon Homes.

Summary

M/I Homes beats William Lyon Homes on 8 of the 14 factors compared between the two stocks.

M/I Homes Company Profile

M/I Homes, Inc. is a builder of single-family homes. The Company consists of two operations: homebuilding and financial services. It operates through Midwest homebuilding, Southern homebuilding, Mid-Atlantic homebuilding and financial services operations segments. The Company and its subsidiaries are engaged primarily in the construction and sale of single-family residential homes in 15 markets: Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Chicago, Illinois; Minneapolis/St. Paul, Minnesota; Tampa, Orlando and Sarasota, Florida; Austin, Dallas/Fort Worth, Houston and San Antonio, Texas; Charlotte and Raleigh, North Carolina; and the Virginia and Maryland suburbs of Washington, D.C. The Company’s financial services operations support its homebuilding operations by providing mortgage loans and title services to the customers of its homebuilding operations. It markets and sells homes primarily under the M/I Homes brand (M/I Homes and Showcase Collection (by M/I)).

William Lyon Homes Company Profile

William Lyon Homes is primarily engaged in the design, construction and sale of single family detached and attached homes in California, Arizona and Nevada. The Company conducts its homebuilding operations through four reportable operating segments: Southern California, Northern California, Arizona and Nevada. For the three months ended March 31, 2012, 37% of home closings were derived from the Company’s California operations. The Company designs, constructs and sells a range of homes designed to meet the needs of each of its markets, although it primarily focuses sales to the entry-level and first time move-up home buyer markets. During the year ended December 31, 2011, the Company marketed its homes through 19 sales locations. In October 2013, the Company purchase 221 homesites at the master-planned Southshore community in Aurora, Colorado.

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