LGIH - Embedded Expectations Analysis - 2021 03 23
LGI Homes, Inc. (LGIH:USA) currently trades below corporate averages relative to UAFRS-based (Uniform) earnings, with a 13.1x Uniform P/E, implying bearish expectations for the firm. Given management's excitement about net income and confidence about community closings and demand, market expectations are overly bearish, suggesting that equity upside is warrantedSpecifically, management generated an excitement marker when saying their adjusted net income increased by over 100% in Q4 2020. Moreover, management is confident the two-year average of their SG&A rate is 10.8%, the Phoenix market garnered about 15 community closings per month, and that they have significant momentum going into 2021. Furthermore, they are confident they will be able to grow their community count by utilizing available inventory and demand for entry-level homes is stronger than ever
Given management's excitement about net income and confidence about community closings and demand, 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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