Intrinsic value of Lennar Cl B - LEN-B

Previous Close

$47.39

  Intrinsic Value

$89.59

stock screener

  Rating & Target

str. buy

+89%

  Value-price divergence*

-44%

Previous close

$47.39

 
Intrinsic value

$89.59

 
Up/down potential

+89%

 
Rating

str. buy

 
Value-price divergence*

-44%

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of LEN-B stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 13.1

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  15.58
  15.60
  14.54
  13.59
  12.73
  11.95
  11.26
  10.63
  10.07
  9.56
  9.11
  8.70
  8.33
  7.99
  7.69
  7.42
  7.18
  6.96
  6.77
  6.59
  6.43
  6.29
  6.16
  6.04
  5.94
  5.85
  5.76
  5.68
  5.62
  5.55
  5.50
Revenue, $m
  10,950
  12,658
  14,499
  16,468
  18,565
  20,784
  23,124
  25,583
  28,159
  30,852
  33,661
  36,588
  39,635
  42,803
  46,097
  49,519
  53,076
  56,772
  60,615
  64,610
  68,765
  73,090
  77,592
  82,282
  87,169
  92,264
  97,580
  103,127
  108,919
  114,969
  121,291
Variable operating expenses, $m
 
  11,037
  12,642
  14,359
  16,185
  18,120
  20,160
  22,303
  24,548
  26,895
  29,344
  31,892
  34,547
  37,309
  40,180
  43,163
  46,263
  49,485
  52,834
  56,316
  59,938
  63,708
  67,632
  71,720
  75,979
  80,421
  85,054
  89,889
  94,937
  100,211
  105,722
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  9,620
  11,037
  12,642
  14,359
  16,185
  18,120
  20,160
  22,303
  24,548
  26,895
  29,344
  31,892
  34,547
  37,309
  40,180
  43,163
  46,263
  49,485
  52,834
  56,316
  59,938
  63,708
  67,632
  71,720
  75,979
  80,421
  85,054
  89,889
  94,937
  100,211
  105,722
Operating income, $m
  1,330
  1,621
  1,857
  2,110
  2,379
  2,664
  2,964
  3,280
  3,611
  3,956
  4,317
  4,697
  5,088
  5,494
  5,917
  6,357
  6,813
  7,288
  7,781
  8,294
  8,827
  9,382
  9,960
  10,562
  11,189
  11,844
  12,526
  13,238
  13,981
  14,758
  15,570
EBITDA, $m
  1,380
  1,675
  1,918
  2,179
  2,456
  2,749
  3,059
  3,384
  3,725
  4,081
  4,453
  4,840
  5,243
  5,662
  6,098
  6,551
  7,021
  7,510
  8,019
  8,547
  9,097
  9,669
  10,264
  10,885
  11,531
  12,205
  12,908
  13,642
  14,409
  15,209
  16,045
Interest expense (income), $m
  67
  220
  265
  314
  367
  423
  482
  544
  610
  678
  750
  825
  903
  984
  1,069
  1,157
  1,248
  1,343
  1,441
  1,544
  1,650
  1,761
  1,876
  1,996
  2,121
  2,251
  2,387
  2,529
  2,677
  2,831
  2,992
Earnings before tax, $m
  1,330
  1,401
  1,592
  1,796
  2,012
  2,241
  2,482
  2,736
  3,001
  3,278
  3,567
  3,872
  4,185
  4,510
  4,848
  5,200
  5,565
  5,945
  6,340
  6,750
  7,177
  7,621
  8,084
  8,566
  9,068
  9,592
  10,139
  10,709
  11,305
  11,927
  12,577
Tax expense, $m
  417
  378
  430
  485
  543
  605
  670
  739
  810
  885
  963
  1,045
  1,130
  1,218
  1,309
  1,404
  1,503
  1,605
  1,712
  1,823
  1,938
  2,058
  2,183
  2,313
  2,448
  2,590
  2,737
  2,891
  3,052
  3,220
  3,396
Net income, $m
  912
  1,023
  1,162
  1,311
  1,469
  1,636
  1,812
  1,997
  2,191
  2,393
  2,604
  2,826
  3,055
  3,292
  3,539
  3,796
  4,063
  4,340
  4,628
  4,928
  5,239
  5,564
  5,901
  6,253
  6,620
  7,002
  7,401
  7,818
  8,252
  8,707
  9,181

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,330
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  15,362
  16,228
  18,588
  21,113
  23,801
  26,646
  29,646
  32,798
  36,101
  39,554
  43,156
  46,908
  50,814
  54,876
  59,098
  63,486
  68,046
  72,785
  77,711
  82,833
  88,161
  93,705
  99,477
  105,489
  111,755
  118,288
  125,102
  132,214
  139,640
  147,396
  155,502
Adjusted assets (=assets-cash), $m
  14,032
  16,228
  18,588
  21,113
  23,801
  26,646
  29,646
  32,798
  36,101
  39,554
  43,156
  46,908
  50,814
  54,876
  59,098
  63,486
  68,046
  72,785
  77,711
  82,833
  88,161
  93,705
  99,477
  105,489
  111,755
  118,288
  125,102
  132,214
  139,640
  147,396
  155,502
Revenue / Adjusted assets
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
  0.780
Average production assets, $m
  215
  253
  290
  329
  371
  416
  462
  512
  563
  617
  673
  732
  793
  856
  922
  990
  1,062
  1,135
  1,212
  1,292
  1,375
  1,462
  1,552
  1,646
  1,743
  1,845
  1,952
  2,063
  2,178
  2,299
  2,426
Working capital, $m
  0
  -1,532
  -1,754
  -1,993
  -2,246
  -2,515
  -2,798
  -3,096
  -3,407
  -3,733
  -4,073
  -4,427
  -4,796
  -5,179
  -5,578
  -5,992
  -6,422
  -6,869
  -7,334
  -7,818
  -8,321
  -8,844
  -9,389
  -9,956
  -10,547
  -11,164
  -11,807
  -12,478
  -13,179
  -13,911
  -14,676
Total debt, $m
  6,276
  7,580
  8,981
  10,481
  12,078
  13,768
  15,550
  17,422
  19,384
  21,435
  23,574
  25,804
  28,124
  30,536
  33,044
  35,651
  38,360
  41,174
  44,100
  47,143
  50,308
  53,601
  57,029
  60,601
  64,322
  68,203
  72,251
  76,475
  80,886
  85,493
  90,308
Total liabilities, $m
  8,336
  9,640
  11,041
  12,541
  14,138
  15,828
  17,610
  19,482
  21,444
  23,495
  25,634
  27,864
  30,184
  32,596
  35,104
  37,711
  40,420
  43,234
  46,160
  49,203
  52,368
  55,661
  59,089
  62,661
  66,382
  70,263
  74,311
  78,535
  82,946
  87,553
  92,368
Total equity, $m
  7,026
  6,589
  7,547
  8,572
  9,663
  10,818
  12,036
  13,316
  14,657
  16,059
  17,521
  19,045
  20,631
  22,280
  23,994
  25,775
  27,627
  29,551
  31,551
  33,630
  35,793
  38,044
  40,388
  42,829
  45,372
  48,025
  50,791
  53,679
  56,694
  59,843
  63,134
Total liabilities and equity, $m
  15,362
  16,229
  18,588
  21,113
  23,801
  26,646
  29,646
  32,798
  36,101
  39,554
  43,155
  46,909
  50,815
  54,876
  59,098
  63,486
  68,047
  72,785
  77,711
  82,833
  88,161
  93,705
  99,477
  105,490
  111,754
  118,288
  125,102
  132,214
  139,640
  147,396
  155,502
Debt-to-equity ratio
  0.893
  1.150
  1.190
  1.220
  1.250
  1.270
  1.290
  1.310
  1.320
  1.330
  1.350
  1.350
  1.360
  1.370
  1.380
  1.380
  1.390
  1.390
  1.400
  1.400
  1.410
  1.410
  1.410
  1.410
  1.420
  1.420
  1.420
  1.420
  1.430
  1.430
  1.430
Adjusted equity ratio
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406
  0.406

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  912
  1,023
  1,162
  1,311
  1,469
  1,636
  1,812
  1,997
  2,191
  2,393
  2,604
  2,826
  3,055
  3,292
  3,539
  3,796
  4,063
  4,340
  4,628
  4,928
  5,239
  5,564
  5,901
  6,253
  6,620
  7,002
  7,401
  7,818
  8,252
  8,707
  9,181
Depreciation, amort., depletion, $m
  50
  54
  61
  69
  77
  86
  95
  104
  114
  125
  136
  143
  155
  168
  181
  194
  208
  223
  238
  253
  270
  287
  304
  323
  342
  362
  383
  404
  427
  451
  476
Funds from operations, $m
  -177
  1,077
  1,223
  1,379
  1,546
  1,722
  1,907
  2,101
  2,305
  2,518
  2,740
  2,970
  3,210
  3,460
  3,720
  3,990
  4,271
  4,563
  4,866
  5,181
  5,509
  5,850
  6,206
  6,576
  6,962
  7,364
  7,784
  8,222
  8,680
  9,158
  9,657
Change in working capital, $m
  -685
  -207
  -223
  -238
  -254
  -269
  -283
  -298
  -312
  -326
  -340
  -354
  -369
  -383
  -399
  -414
  -430
  -447
  -465
  -483
  -503
  -523
  -545
  -567
  -591
  -617
  -643
  -671
  -701
  -732
  -765
Cash from operations, $m
  508
  1,283
  1,446
  1,618
  1,799
  1,990
  2,190
  2,399
  2,617
  2,844
  3,080
  3,324
  3,579
  3,844
  4,119
  4,404
  4,701
  5,010
  5,331
  5,664
  6,012
  6,374
  6,750
  7,143
  7,553
  7,981
  8,427
  8,893
  9,380
  9,890
  10,422
Maintenance CAPEX, $m
  0
  -42
  -50
  -57
  -65
  -73
  -82
  -91
  -100
  -110
  -121
  -132
  -143
  -155
  -168
  -181
  -194
  -208
  -223
  -238
  -253
  -270
  -287
  -304
  -323
  -342
  -362
  -383
  -404
  -427
  -451
New CAPEX, $m
  -76
  -39
  -37
  -39
  -42
  -44
  -47
  -49
  -52
  -54
  -56
  -59
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -80
  -83
  -86
  -90
  -94
  -98
  -102
  -106
  -111
  -116
  -121
  -126
Cash from investing activities, $m
  -86
  -81
  -87
  -96
  -107
  -117
  -129
  -140
  -152
  -164
  -177
  -191
  -204
  -218
  -234
  -249
  -265
  -282
  -300
  -318
  -336
  -356
  -377
  -398
  -421
  -444
  -468
  -494
  -520
  -548
  -577
Free cash flow, $m
  422
  1,202
  1,359
  1,521
  1,693
  1,873
  2,062
  2,259
  2,465
  2,679
  2,902
  3,133
  3,374
  3,625
  3,885
  4,155
  4,436
  4,728
  5,031
  5,347
  5,675
  6,017
  6,374
  6,745
  7,133
  7,537
  7,959
  8,400
  8,860
  9,342
  9,845
Issuance/(repayment) of debt, $m
  -198
  1,304
  1,402
  1,500
  1,596
  1,690
  1,782
  1,872
  1,962
  2,051
  2,140
  2,229
  2,320
  2,413
  2,508
  2,606
  2,709
  2,815
  2,926
  3,042
  3,165
  3,293
  3,429
  3,571
  3,722
  3,880
  4,048
  4,224
  4,411
  4,607
  4,815
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -216
  1,304
  1,402
  1,500
  1,596
  1,690
  1,782
  1,872
  1,962
  2,051
  2,140
  2,229
  2,320
  2,413
  2,508
  2,606
  2,709
  2,815
  2,926
  3,042
  3,165
  3,293
  3,429
  3,571
  3,722
  3,880
  4,048
  4,224
  4,411
  4,607
  4,815
Total cash flow (excl. dividends), $m
  206
  2,506
  2,761
  3,022
  3,289
  3,563
  3,844
  4,132
  4,427
  4,730
  5,042
  5,363
  5,694
  6,038
  6,393
  6,762
  7,144
  7,543
  7,957
  8,389
  8,840
  9,311
  9,802
  10,317
  10,854
  11,417
  12,007
  12,624
  13,271
  13,949
  14,660
Retained Cash Flow (-), $m
  -1,377
  -893
  -958
  -1,025
  -1,091
  -1,155
  -1,218
  -1,280
  -1,341
  -1,402
  -1,462
  -1,524
  -1,586
  -1,649
  -1,714
  -1,782
  -1,851
  -1,924
  -2,000
  -2,080
  -2,163
  -2,251
  -2,343
  -2,441
  -2,544
  -2,652
  -2,767
  -2,887
  -3,015
  -3,149
  -3,291
Prev. year cash balance distribution, $m
 
  1,330
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  2,943
  1,803
  1,996
  2,198
  2,408
  2,626
  2,852
  3,086
  3,328
  3,580
  3,839
  4,109
  4,388
  4,679
  4,980
  5,293
  5,619
  5,957
  6,310
  6,677
  7,060
  7,459
  7,876
  8,311
  8,765
  9,240
  9,737
  10,256
  10,800
  11,369
Discount rate, %
 
  6.70
  7.04
  7.39
  7.76
  8.14
  8.55
  8.98
  9.43
  9.90
  10.39
  10.91
  11.46
  12.03
  12.63
  13.27
  13.93
  14.63
  15.36
  16.12
  16.93
  17.78
  18.67
  19.60
  20.58
  21.61
  22.69
  23.82
  25.01
  26.26
  27.58
PV of cash for distribution, $m
 
  2,759
  1,574
  1,612
  1,630
  1,628
  1,605
  1,562
  1,501
  1,423
  1,332
  1,229
  1,118
  1,002
  885
  769
  657
  552
  455
  369
  292
  227
  173
  128
  93
  66
  45
  30
  20
  12
  8
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Lennar Corporation is a provider of real estate related financial services, commercial real estate, investment management and finance company. The Company is a homebuilder that operates in various states. Its segments include Homebuilding East, Homebuilding Central, Homebuilding West, Lennar Financial Services, Rialto and Lennar Multifamily. It is a developer of multifamily rental properties. Its Homebuilding operations include the construction and sale of single-family attached and detached homes, as well as the purchase, development and sale of residential land. It operates primarily under the Lennar brand name. The Lennar Financial Services segment includes mortgage financing, title insurance and closing services for both buyers of its homes and others. The Rialto segment is a real estate, investment management, and finance company. The Lennar Multifamily segment focuses on developing a portfolio of institutional multifamily rental properties in the United States markets.

FINANCIAL RATIOS  of  Lennar Cl B (LEN-B)

Valuation Ratios
P/E Ratio 12.2
Price to Sales 1
Price to Book 1.6
Price to Tangible Book
Price to Cash Flow 21.9
Price to Free Cash Flow 25.7
Growth Rates
Sales Growth Rate 15.6%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -16.5%
Cap. Spend. - 3 Yr. Gr. Rate 56.9%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 89.3%
Total Debt to Equity 89.3%
Interest Coverage 21
Management Effectiveness
Return On Assets 6.4%
Ret/ On Assets - 3 Yr. Avg. 6.1%
Return On Total Capital 7.1%
Ret/ On T. Cap. - 3 Yr. Avg. 6.8%
Return On Equity 14.4%
Return On Equity - 3 Yr. Avg. 14.6%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 13.7%
Gross Margin - 3 Yr. Avg. 13.8%
EBITDA Margin 13.2%
EBITDA Margin - 3 Yr. Avg. 13.7%
Operating Margin 12.1%
Oper. Margin - 3 Yr. Avg. 12.5%
Pre-Tax Margin 12.1%
Pre-Tax Margin - 3 Yr. Avg. 12.5%
Net Profit Margin 8.3%
Net Profit Margin - 3 Yr. Avg. 8.3%
Effective Tax Rate 31.4%
Eff/ Tax Rate - 3 Yr. Avg. 32.9%
Payout Ratio 3.8%

LEN-B stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the LEN-B stock intrinsic value calculation we used $10950 million for the last fiscal year's total revenue generated by Lennar Cl B. The default revenue input number comes from 2016 income statement of Lennar Cl B. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our LEN-B stock valuation model: a) initial revenue growth rate of 15.6% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 6.7%, whose default value for LEN-B is calculated based on our internal credit rating of Lennar Cl B, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Lennar Cl B.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of LEN-B stock the variable cost ratio is equal to 87.2%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for LEN-B stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Lennar Cl B.

Corporate tax rate of 27% is the nominal tax rate for Lennar Cl B. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the LEN-B stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for LEN-B are equal to 2%.

Life of production assets of 5.1 years is the average useful life of capital assets used in Lennar Cl B operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for LEN-B is equal to -12.1%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $7026 million for Lennar Cl B - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 276.432 million for Lennar Cl B is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Lennar Cl B at the current share price and the inputted number of shares is $13.1 billion.

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Financial statements of LEN-B
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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