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

Volatility & Risk

William Lyon Homes has a beta of 1.81, indicating that its stock price is 81% more volatile than the S&P 500. Comparatively, TRI Pointe Group has a beta of 1.74, indicating that its stock price is 74% more volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
William Lyon Homes 3.61% 9.33% 3.58%
TRI Pointe Group 6.97% 9.32% 4.62%

Valuation and Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
William Lyon Homes $1.41 billion 0.64 $59.69 million $1.53 18.46
TRI Pointe Group $2.40 billion 1.09 $195.17 million $1.10 15.84

TRI Pointe Group has higher revenue and earnings than William Lyon Homes. TRI Pointe 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.

Analyst Recommendations

This is a breakdown of recent ratings for William Lyon Homes and TRI Pointe Group, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
William Lyon Homes 0 2 2 0 2.50
TRI Pointe Group 0 4 5 0 2.56

William Lyon Homes presently has a consensus price target of $27.25, suggesting a potential downside of 3.54%. TRI Pointe Group has a consensus price target of $16.75, suggesting a potential downside of 3.85%. Given William Lyon Homes’ higher probable upside, analysts plainly believe William Lyon Homes is more favorable than TRI Pointe Group.

Institutional and Insider Ownership

98.1% of William Lyon Homes shares are held by institutional investors. 22.3% of William Lyon Homes shares are held by company insiders. Comparatively, 2.2% of TRI Pointe Group shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Summary

TRI Pointe Group beats William Lyon Homes on 8 of the 14 factors compared between the two stocks.

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.

TRI Pointe Group Company Profile

TRI Pointe Group, Inc. is a homebuilder company. The Company’s operations are organized in two principal businesses, including homebuilding and financial services. Its homebuilding operation consists of six segments: Maracay Homes, including operations in Arizona; Pardee Homes, consisting of operations in California and Nevada; Quadrant Homes, consisting of operations in Washington; Trendmaker Homes, consisting of operations in Texas; TRI Pointe Homes, consisting of operations in California and Colorado, and Winchester Homes, consisting of operations in Maryland and Virginia. Its financial services operation (TRI Pointe Solutions) includes mortgage financing operations and title services operations. Its mortgage financing operation (TRI Pointe Connect) provides mortgage financing to its homebuyers in all of its operated markets. Its title services operation (TRI Pointe Assurance) provides title examinations for its homebuyers in its Trendmaker Homes and Winchester Homes brands.

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