Money Markets

Reading the Tea Leaves for Lennar Corporation (LEN)

Investors have been carefully witnessing the recent activity of Lennar Corporation (NYSE:LEN) stock. Many analysts use price trends and patterns to predict future performance, and we can glean some important insights about LEN by examining the chart.

How has the stock performed recently?

Lennar Corporation (NYSE:LEN) has been trading in a bullish manner, based on the relative positions of the stock’s 20 and 200 day moving averages. In the last month, the price of LEN has decreased -14.32%. Shares are now up over the past year, outperforming the broad market by -100% and outperformed a peer group of similar companies by 63%. After the latest session, which saw the stock close at a price of $59.34, LEN sits below its 52-week high.

Momentum indicators

Of course, these surface-level price movements don’t tell us much about the direction that LEN may be headed in the future. Fortunately, there is way to use the speed and magnitude of these price changes to predict future performance, thanks to what are known as momentum indicators. As momentum slows, it might be a sign that a support or resistance level has been reached, and that a trend is about to reverse. Two such indicators are the RSI (Relative Strength Index) and the Stochastic %k Oscillator, which fluctuate on a scale of 0 to 100. A reading above 70 indicates that a stock is overvalued, and a reading below 30 implies that it is undervalued. The 20-day RSI for LEN is 39.24%, which suggests that the stock is not particularly expensive or cheap, and not predisposed to a reactive price movement based on this measure. The 20-day Stochastic %k measure, which sits at 18.69%, tells a different story, and suggests that LEN currently trades in oversold territory.

What do the trading volumes reveal?

In addition to price, analysts use volume trends to predict future performance. The level of trading activity in a stock is often a good proxy for the level of interest and enthusiasm for the name within the investment community. A sudden increase in activity can be a sign that investors are trading in anticipation of a catalyst. Lennar Corporation (LEN) average trading volume of 5,857,630 during the past month is 100.46% above its average volume over the past year, indicating that investors have been more active than usual in the stock in recent times.

What do the analysts think?

LEN is currently undervalued by -23.98% relative to the average 1-year price target of $78.06 taken from a group of Wall Street Analysts. The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 1.90, which implies that analysts are generally bullish in their outlook for LEN over the next year.

How risky is the stock?

When analyzing a stock’s price performance, it’s essential to take risk into account. Beta, which measures a stock’s volatility relative to the overall market, can be used to gauge the level of systematic risk associated with a particular stock.

Lennar Corporation (NYSE:LEN) has a beta of 1.16, compared to a beta of 1 for the market, which implies that the stock’s price movements are more extreme than the market as a whole. LEN therefore has an above average level of market risk. During the past couple of weeks, LEN average daily volatility was 38.06%, which is -11.66 percentage points higher than the average volatility over the past 100 days.

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