This home builder beat analysts’ EPS forecasts by $0.05 last quarter, and Wall Street expects the company to grow at an annual rate of 14.83% over the next five years.
LGI Homes, Inc. (LGIH)
From Cabot Undervalued Stocks Advisor
LGI Homes, Inc. (LGIH) joins the Buy Low Opportunities Portfolio with a Strong Buy recommendation. LGI Homes is the tenth largest residential homebuilder in America. The company is currently building homes, primarily for first-time homebuyers, in 19 U.S. states from coast-to-coast and the District of Columbia. During November, the company announced new communities in the Daytona Beach, Jacksonville and Sarasota, FL markets.
In November, LGI Homes reported third quarter EPS of $1.93 vs. the $1.88 consensus estimate, and forecasted full year 2019 EPS within a range of $7.00-$7.60. Analysts expect full year EPS to grow 7.5% and 14.4% in 2019 and 2020. The 2020 P/E is 9.3. Full year revenue has grown from $383 million in 2014 to $1.5 billion in 2018. Analysts project revenue reaching $2.1 billion in 2020. Diluted earnings per share have grown just as aggressively, from $1.33 in 2014 to $6.24 in 2018, and expected to reach $7.68 in 2020.
The company closed on 715 homes in October vs. 468 homes in October 2018. For the full year 2019, the company anticipates closing on between 7,100-7,600 homes in 105-115 active selling communities.
LGI is a small-cap stock with a $1.7 billion market capitalization and heavy institutional ownership. The stock broke past long-term price resistance at 80 in August, peaking near 88 in October (a new all-time high), then immediately pulling back and settling into a 70-72 range in November. There’s 23% upside as the stock eventually retraces its October high.
Housing stocks can be volatile, taking cues from economic data and interest rates. LGIH is a good choice for traders and experienced growth stock investors. Strong Buy.
Crista Huff, Cabot Undervalued Stocks Advisor, www.cabotwealth.com, 978-745-5532, December 3, 2019