LGIH - Embedded Expectations Analysis - 2020 12 03
LGI Homes, Inc. (LGIH:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 12.4x Uniform P/E, implying bearish expectations for the firm. Even with management's concerns about demand, their liquidity position, and pricing, the market is overly pessimistic and equity upside is warrantedSpecifically, management may have concerns about the sustainability of home demand, continued increases in marketing spend, and their Vacant Developed Lot (VDLs) inventory. They may also lack confidence in their ability to execute the remainder of their stock buyback program. Finally, they may lack confidence in their ability to maintain their liquidity position, meet the needs of their buyers, and offer more affordable prices
Even with management's concerns about demand, their liquidity position, and pricing, the firm's historically strong execution and substantial growth opportunities suggest markets are overly bearish, and upside is warranted
LGI Homes is a holding company. Through its subsidiaries, the company is engaged in the design, construction, and sale of new homes in markets in Texas, Arizona, Florida, Georgia, New Mexico, South Carolina, North Carolina, Colorado, Washington, Tennessee, Minnesota, Oklahoma, Alabama, California, Oregon, and Nevada. The company's product offerings include entry-level homes, including both detached homes and townhomes, and move-up homes sold, which are sold under its LGI Homes brand, and its luxury series homes, which are sold under its Terrata Homes brand. The company's homebuilding operations are organized and managed by seven divisions: West, Northwest, Central, Midwest, Florida, Southeast and Mid-Atlantic.
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