LEN – Market expectations are for Uniform ROA to compress and management may have concerns about the market conditions, home sales, and M&A activity
- Lennar Corporation (LEN) currently trades well below historical and corporate averages relative to Uniform earnings, with a 5.6x Uniform P/E (Fwd. V/E’).
At these levels, markets are pricing in expectations for Uniform ROA to compress substantially to 4%, accompanied by 7% Uniform asset growth.
Meanwhile, analysts expect Uniform ROA to contract to 20% in 2023, accompanied by 20% Uniform asset growth.
If sustained going forward, these levels would imply a stock price closer to $659, representing significant potential equity upside for the firm.
That said, as a homebuilder exposed to a favorable housing market cycle, it is unlikely that peak cycle performance would carry on indefinitely.
Moreover, the firm’s most recent earnings call suggests management may have concerns about market conditions, home sales, and M&A activity.