Lennar CorporationLENNYSE

Overview Intelligence Charts News Fundamentals Key Metrics TTM Financials Earnings Growth Rating Analysts Institutional Peers Historical

DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $279.28 per share(market-calibrated)

+156.2%

Upside to Fair Value

Current

$109.00

Pure Model

$288.66

Fair Value

$279.28

Bull Case

$347.76

Bear Case

$232.53

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.50%

Calibrated Growth

2.13%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $288.66.

What's Driving This Ratingfor LEN

✓

CapEx already efficient

CapEx at 0.34% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

→

Moderate revenue growth

Analyst consensus projects -3.31% revenue growth, fading to 3.00% by Year 10. Revenue reaches $47.6B (vs $34.2B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $236.40/share (16.9x terminal FCF) while exit multiple gives $340.92/share (29.5x terminal FCF). The 20x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% growth is more conservative. The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 250bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 67.75% indicates efficient cash generation. FCF reaches $5.1B by Year 10 (10.72% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.46

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)11.07%

Cost of Debt

Pre-tax Cost of Debt0.28%

Tax Rate25.07%

After-tax Cost of Debt0.21%

Equity Weight (E/V)81.64%

Debt Weight (D/V)18.36%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (81.64% × 11.07%) + (18.36% × 0.21%)

= 9.08%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$33.1B	$37.7B	$41.1B	$43.6B	$47.6B
EBIT	$5.1B	$5.8B	$6.4B	$6.8B	$7.4B
Tax	$1.3B	$1.5B	$1.6B	$1.7B	$1.9B
NOPAT	$3.8B	$4.4B	$4.8B	$5.1B	$5.5B
+ Depreciation	$103M	$117M	$128M	$136M	$149M
- Capex	$113M	$128M	$140M	$148M	$162M
- Δ NWC	-$339M	$909M	$359M	$381M	$416M
Free Cash Flow	$4.2B	$3.5B	$4.4B	$4.7B	$5.1B
Discount Factor	0.917	0.770	0.648	0.544	0.419
Present Value	$3.8B	$2.7B	$2.9B	$2.5B	$2.1B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$5.1B

Terminal Growth Rate3.00%

WACC9.08%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$86.5B

PV of Terminal Value$36.3B

Exit Multiple Method

Year 10 EBITDA$7.5B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$150.8B

PV of Terminal Value$63.2B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$27.2B

PV of Terminal Value$36.3B

Enterprise Value$63.4B

(-) Net Debt$2.5B

Equity Value$60.9B

Shares Outstanding258M

Price per Share$236.40

Exit Multiple Method

PV of Projected FCFs$27.2B

PV of Terminal Value$63.2B

Enterprise Value$90.4B

(-) Net Debt$2.5B

Equity Value$87.9B

Shares Outstanding258M

Price per Share$340.92

Pure Model Fair Value

$288.66

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
7.08%	$354.16	$365.66	$379.98	$398.31	$422.59
8.08%	$311.63	$318.89	$327.57	$338.15	$351.32
9.08%	$278.13	$283.00	$288.66	$295.34	$303.33
10.08%	$250.71	$254.12	$258.01	$262.49	$267.70
11.08%	$227.65	$230.12	$232.89	$236.03	$239.62

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$232.53

113.3% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.83

Base Case

$288.66

164.8% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.46

Bull Case

$347.76

219.0% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.24

Key Assumptions & Drivers• Consumer Cyclical Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-3.31%

Year 3 Revenue Growth8.74%

Year 5 Revenue Growth3.00%

Year 7 Revenue Growth3.00%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin15.51%

Tax Rate25.07%

Historical Capex / Rev0.34%

NWC / Revenue30.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 20x EV/EBITDA (Consumer Cyclical sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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