Tony Anderson
Summary
This article is following my coverage of Lennar Corporation (NYSE:LEN), where I recommended a hold rating in the near term due to my expectation that margins and ROE will decline in FY23. This is an update on my thoughts
Lennar Corporation: Remain Neutral On The Stock As Valuation Is Not Attractive
Summary
- I maintain a hold rating for LEN due to a potential weak FY23 and FY24 and an unattractive upside based on my DCF model.
- Despite stronger than expected 2Q23 results, I believe high interest rates will continue to affect consumer demand for housing.
- I think that LEN's strategy of maintaining a supply-demand gap and a land-light business model could improve FCF conversion.
I take a fundamentals-based approach to value investing.I disagree with the common misconception held by many investors that low multiple stocks must be cheap. I look for companies that offer the best long-term durability at the most affordable prices. Consequently, I have a propensity to be drawn to companies with steady long-term growth, no cyclicality, and a robust balance sheet.Nevertheless, investing in successful company is risky because one may end up paying too much (this is where valuation matters). I firmly believe this, yet there are situations where the development runway is so vast that price matters much less in the immediate future.
Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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