Lennar

Methodology

Lennar's homebuilding business creates highly cyclical earnings tied to housing demand, mortgage rates, and buyer affordability. The company's scale advantages and land banking provide competitive positioning. This calculation is very challenging given extreme cyclicality—normalized assumptions about mid-cycle housing starts and margins are essential, while peak cycle earnings dramatically overstate sustainable profitability.

Methodology

Lennar's PEG ratio swings wildly across housing cycles, often appearing cheap during recoveries but potentially signaling peak conditions. The company's operational efficiency and financial services provide some advantages. For homebuilders, PEG based on cyclical earnings growth is misleading—valuation should focus on book value, normalized returns, and cycle positioning relative to affordability metrics.

Methodology

Lennar pays a modest dividend and substantial special dividends reflecting strong cash generation during up-cycles. The company prioritizes opportunistic land purchases and buybacks over fixed dividend commitments. PEGY has limited applicability given earnings and cash flow volatility—for homebuilders, cycle timing and affordability trends matter far more than dividend-adjusted metrics.