A Technical Breakdown Of Mega-Homebuilder Lennar
Lennar Corporation (NYSE: LEN) stock has been a market-leader since its August low, and the modest nature of its recent pullback was further confirmation of the mega-homebuilder's leadership.
Can the macro environment -- and fundamentals -- continue to propel shares higher?
What The Bulls See...
• An enterprise value of $14.03 billion that eclipses a market capitalization of $9.01 billion
• A price-to-book ratio of 1.96
• A price-to-sales ratio of 1.26
• A P/E ratio near 14 compared to estimated 2015 growth in revenues and EPS of 16.1 percent and 21.6 percent, respectively
• 7.84 percent net profit margins
• A relatively healthy current ratio of 7.05
What The Bears See...
• Negative operating and levered free cash flows
• Cash of $755 million versus total debt of $5.80 billion
• A debt-to-equity ratio of 115.10 percent
The Technical Take
Technicians, in particular, note that Lennar looks like it may be on the verge of a breakout of a “cup and handle” formation to the upside. The stock will have to close above $44.40 for the breakout to kick into high gear.
If it does, though, the upside for Lennar shares could last until at least the $50 projected resistance level. A failure at $44.40 and subsequent downside reversal may lead to a run back to the July-August lows at $36.74.
Lennar bulls will likely look for any pullback to around $40 (or a breakout above the $44.40 resistance and a subsequent retest of that level) before buying more.
With the still-muted interest rate environment and slightly improving economy here in the U.S., the macro picture appears to be providing Lennar the tailwind it needs to make the breakout above the key $44.40 resistance level.
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