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    Lennar’s Backlog Decline and Shrinking Returns Might Change The Case For Investing In Lennar (LEN)

    Simply Wall St·01/05/2026 01:17:32
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    • Lennar, one of the largest U.S. homebuilders, has recently reported an average 16.5% backlog decline over two years alongside shrinking returns on capital, highlighting mounting pressure on its operations.
    • This combination of weaker order visibility and lower capital efficiency suggests the company may need to rethink its product mix and go-to-market approach in an increasingly competitive housing market.
    • Next, we will examine how concerns about Lennar’s declining backlog interact with its asset-light strategy and mortgage-sensitive earnings narrative.

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    Lennar Investment Narrative Recap

    To own Lennar, you generally need to believe that its asset-light, volume-focused model can still convert U.S. housing demand into solid cash generation, even with slower earnings growth. The recent 16.5% average backlog decline and weaker returns on capital directly challenge that thesis, because they put more weight on shorter term order trends and pricing power. For now, this news mainly reinforces the key near term risk of margin pressure in a mortgage sensitive market rather than creating a new one.

    The most relevant recent development is Lennar’s latest full year 2025 results, which showed revenue slipping to US$34,186.93 million and net income falling to US$2,078.18 million, with net margins down to 6.1% from 11%. Together with the shrinking backlog, this earnings reset makes the company’s asset-light, land-light model a central catalyst to watch, as investors weigh whether it can support consistent volume and cash returns when profitability is already under strain.

    Yet while Lennar’s model is built to keep homes affordable and volume steady, investors should be aware that...

    Read the full narrative on Lennar (it's free!)

    Lennar's narrative projects $40.2 billion revenue and $2.5 billion earnings by 2028. This requires 4.3% yearly revenue growth and a $0.7 billion earnings decrease from $3.2 billion today.

    Uncover how Lennar's forecasts yield a $127.13 fair value, a 22% upside to its current price.

    Exploring Other Perspectives

    LEN 1-Year Stock Price Chart
    LEN 1-Year Stock Price Chart

    Seven members of the Simply Wall St Community currently place Lennar’s fair value between about US$90.82 and US$162.49, underscoring how far opinions can differ. You can weigh those views against the recent backlog decline and margin compression to consider what that might mean for Lennar’s ability to sustain its asset-light approach over time.

    Explore 7 other fair value estimates on Lennar - why the stock might be worth 13% less than the current price!

    Build Your Own Lennar Narrative

    Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

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    This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.