Lennar trades at $135.25 and has moved in lockstep with the market. Its shares have returned 11.3% over the last six months while the S&P 500 has gained 8.1%.
Is there a buying opportunity in Lennar, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think Lennar Will Underperform?
We're cautious about Lennar. Here are three reasons you should be careful with LEN and a stock we'd rather own.
1. Backlog Declines as Orders Drop
In addition to reported revenue, backlog is a useful data point for analyzing Home Builders companies. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into Lennar’s future revenue streams.
Lennar’s backlog came in at $6.48 billion in the latest quarter, and it averaged 20.4% year-on-year declines over the last two years. This performance was underwhelming and shows the company is not winning new orders. It also suggests there may be increasing competition or market saturation. 
2. EPS Took a Dip Over the Last Two Years
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Sadly for Lennar, its EPS declined by 11.2% annually over the last two years while its revenue grew by 2.6%. This tells us the company became less profitable on a per-share basis as it expanded.
3. Free Cash Flow Margin Dropping
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
As you can see below, Lennar’s margin dropped by 13.5 percentage points over the last five years. If its declines continue, it could signal increasing investment needs and capital intensity. Lennar’s free cash flow margin for the trailing 12 months was breakeven.
Final Judgment
Lennar doesn’t pass our quality test. That said, the stock currently trades at 12.7× forward P/E (or $135.25 per share). This valuation is reasonable, but the company’s shaky fundamentals present too much downside risk. There are better investments elsewhere. We’d suggest looking at a top digital advertising platform riding the creator economy.
Stocks We Would Buy Instead of Lennar
Trump’s April 2025 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.
