Toll Brothers (NYSE: TOL) and LGI Homes (NASDAQ:LGIH) are both construction companies, but which is the superior stock? We will compare the two companies based on the strength of their risk, profitability, earnings, analyst recommendations, institutional ownership, dividends and valuation.

Dividends

Toll Brothers pays an annual dividend of $0.32 per share and has a dividend yield of 0.8%. LGI Homes does not pay a dividend. Toll Brothers pays out 11.9% of its earnings in the form of a dividend.

Valuation & Earnings

This table compares Toll Brothers and LGI Homes’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Toll Brothers $5.64 billion 1.13 $534.25 million $2.69 14.50
LGI Homes $940.22 million 1.03 $129.13 million $3.78 11.88

Toll Brothers has higher revenue and earnings than LGI Homes. LGI Homes is trading at a lower price-to-earnings ratio than Toll Brothers, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

80.7% of Toll Brothers shares are owned by institutional investors. Comparatively, 93.5% of LGI Homes shares are owned by institutional investors. 8.8% of Toll Brothers shares are owned by company insiders. Comparatively, 13.6% of LGI Homes shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of current recommendations and price targets for Toll Brothers and LGI Homes, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Toll Brothers 1 7 8 0 2.44
LGI Homes 0 3 2 0 2.40

Toll Brothers presently has a consensus price target of $39.90, indicating a potential upside of 2.31%. LGI Homes has a consensus price target of $46.50, indicating a potential upside of 3.56%. Given LGI Homes’ higher probable upside, analysts clearly believe LGI Homes is more favorable than Toll Brothers.

Volatility and Risk

Toll Brothers has a beta of 1.52, indicating that its share price is 52% more volatile than the S&P 500. Comparatively, LGI Homes has a beta of 0.07, indicating that its share price is 93% less volatile than the S&P 500.

Profitability

This table compares Toll Brothers and LGI Homes’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Toll Brothers 8.12% 10.44% 4.67%
LGI Homes 9.22% 23.65% 10.25%

Toll Brothers Company Profile

Toll Brothers, Inc. is engaged in designing, building, marketing, selling and arranging financing for detached and attached homes in luxury residential communities. The Company operates through two segments: Traditional Home Building and Toll Brothers City Living (City Living). Within the Traditional Home Building segment, it operates in five geographic segments in the United States: the North, consisting of Connecticut, Illinois, Massachusetts, Michigan, Minnesota, New Jersey and New York; the Mid-Atlantic, consisting of Delaware, Maryland, Pennsylvania and Virginia; the South, consisting of Florida, North Carolina and Texas; the West, consisting of Arizona, Colorado, Nevada and Washington, and California. City Living is the Company’s urban development division. Its products include Traditional Home Building Product and City Living Product. Its Traditional Home Building Product includes detached homes, move-up, executive, estate, and active-adult and age-qualified lines of home.

LGI Homes Company Profile

LGI Homes, Inc. is a homebuilder and land developer. The Company is engaged in the design, construction, marketing and sale of new homes in markets in Texas, Arizona, Florida, Georgia, New Mexico, South Carolina, North Carolina, Colorado, Washington and Tennessee. The Company operates through five segments: the Texas division, the Southwest division, the Southeast division, the Florida division and the Northwest division. The Texas division includes homebuilding operations in Houston, Dallas/Fort Worth, San Antonio and Austin locations. The Southwest division includes homebuilding operations in Phoenix, Tucson, Albuquerque, Denver and Colorado Springs locations. The Southeast division includes homebuilding operations in Atlanta, Charlotte and Nashville locations. The Florida division includes homebuilding operations in Tampa, Orlando, Fort Myers and Jacksonville locations. The Northwest division includes homebuilding operations in Seattle location.

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