Deconstructing the LGI Homes Stock Fundamentals

LGIH announces opening of townhome community near DFW area

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LGI Homes, Inc. (NASDAQ:LGIH) is a Texas-based builder of new construction homes and housing developments, with its development projects mostly focused in the southwestern region of the United States. The homebuilding company is engaged in the design, construction, and sale of homes across 35 markets in 19 states. LGIH is primarily focused on the entry-level homebuyer, offering homes at lower prices.

This week LGI Homes announced the grand opening of South Park Meadows, a townhome community in Princeton, Texas. The townhomes will include upgrades and will be available to homebuyers starting in the $360,000 range.

Furthermore, LGI Homes stock has decreased about 46% in price year-over-year and LGIH is down 49% since hitting a 52-week high of $185.00 last June. Shares of LGIH have dropped in price 36% year-to-date. Additionally, LGI Homes stock is currently trading around its 52-week low of $88.13 reached in mid-April.

Moreover, the homebuilding company reported a 28.8% increase in revenues and a 32.6% increase in net income for fiscal 2021. LGI Homes has also managed to grow their annual revenues and net income by 102.7% and 176.7%, respectively, between fiscal 2018 and fiscal 2021, maintaining consistent growth on a yearly basis.

LGIH is expected to continue their upward trajectory for fiscal 2022, with 2.5% estimated revenue growth and 12.9% estimated earnings growth. The company is also estimated to increase revenues by 10.3% for fiscal 2023. However, LGI Homes' earnings growth streak is expected to end for fiscal 2023, with an estimated 2.7% decline. On top of that, LGIH holds a weak balance sheet with $50.51 million in cash and $810.57 million in total debt, which could affect their earnings in the coming years.

LGI Homes stock continues to be an intriguing option for value investors. LGIH trades at an extremely low forward price-earnings ratio of 6.36 and a price-sales ratio of 0.82, leaving it with decent of upside potential in the short-term, should the company accomplish their earnings expectations for the fiscal year.

 

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