Financial Comparison: CalAtlantic Group (CAA) and William Lyon Homes (WLH)

CalAtlantic Group (NYSE: CAA) and William Lyon Homes (NYSE:WLH) are both construction companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, valuation, profitability, analyst recommendations, dividends, institutional ownership and risk.

Profitability

This table compares CalAtlantic Group and William Lyon Homes’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
CalAtlantic Group 6.85% 10.35% 5.01%
William Lyon Homes 3.61% 9.33% 3.58%

Risk and Volatility

CalAtlantic Group has a beta of 1.59, suggesting that its stock price is 59% 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.

Valuation and Earnings

This table compares CalAtlantic Group and William Lyon Homes’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
CalAtlantic Group $6.39 billion 1.13 $484.73 million $3.37 18.38
William Lyon Homes $1.41 billion 0.72 $59.69 million $1.53 20.92

CalAtlantic Group has higher revenue and earnings than William Lyon Homes. CalAtlantic Group 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.

Institutional and Insider Ownership

98.2% of William Lyon Homes shares are owned by institutional investors. 39.5% of CalAtlantic Group shares are owned by insiders. Comparatively, 21.3% of William Lyon Homes shares are owned 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.

Dividends

CalAtlantic Group pays an annual dividend of $0.16 per share and has a dividend yield of 0.3%. William Lyon Homes does not pay a dividend. CalAtlantic Group pays out 4.7% of its earnings in the form of a dividend. William Lyon Homes has increased its dividend for 2 consecutive years.

Analyst Ratings

This is a breakdown of current recommendations and price targets for CalAtlantic Group and William Lyon Homes, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CalAtlantic Group 0 13 1 0 2.07
William Lyon Homes 0 2 1 0 2.33

CalAtlantic Group presently has a consensus price target of $45.25, suggesting a potential downside of 26.96%. William Lyon Homes has a consensus price target of $33.00, suggesting a potential upside of 3.09%. Given William Lyon Homes’ stronger consensus rating and higher probable upside, analysts plainly believe William Lyon Homes is more favorable than CalAtlantic Group.

Summary

CalAtlantic Group beats William Lyon Homes on 9 of the 16 factors compared between the two stocks.

CalAtlantic Group Company Profile

CalAtlantic Group, Inc. is a diversified builder of single-family attached and detached homes. The Company operates through two segments: homebuilding and financial services. The homebuilding segment operations include acquiring and developing land, and constructing and selling single-family attached and detached homes. The Financial Services segment includes mortgage financing operation, which provides mortgage financing to its homebuyers in the markets, in which it operates, and sells all of the loans it originates in the secondary mortgage market. The Company builds homes in communities that meet the desires of customers across the homebuilding spectrum, from entry level to luxury, in over 43 metropolitan statistical areas spanning 19 states and the District of Columbia. The Company also provides mortgage, title and escrow services. The Company provides mortgage loans to its homebuyers through its mortgage financing subsidiary, CalAtlantic Mortgage.

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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