LGI Homes candidate stock

Investment Analysis Clubs Saul’s Investing Discussions
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The housing market has been picking up and some home builders have been doing ok. I came across an article on a small home builder called LGI Homes. Here is a summary and link of 9/11/15 IBD “New America” Article.
http://news.investors.com/091015-770439-lgi-homes-grows-in-d…

Rising apartment rents are helping drive new homes (6 straight months of 5% or greater annualized rent growth through July). 5.2% for July was highest in 4 years.

targets renters for its low-priced entry level homes, showing how they can afford a mortgage for same or less than their rent.

Avg price of LGI home increased 15.8% in second quarter. Keeping it affordable but building the same set of floor plans over and over. Try to get an FHA 3.5% down payment deal for their clients. Once qualified, they walk them out to a home and say it can be theirs for the price of rent (pretty good sell if you ask me). (On a side note, has anyone seen the HGTV show about the tiny homes people are buying. Jeez).

Fast growing, for 6 months ending June they closed 32.9% more homes (1542) than same period a year ago and they expect to close 3000 to 3300 in 2015. Revs were up 49%, earnings up 53%. Mgt expect 75% earnings growth in 2015.

See strong traffic and “standing room only on the weekends”. They are in areas with fast growing economies where you can build cheap homes.
The own 22,200 lots, good for 3-5 years.

Rely on low interest rates for first time buyers and will build small homes if necessary when interest rates go up.

A chart on the article shows earning going from $1.40 in 2014 to estimated $2.80 in 2016 and almost $4. 20 in 2017.

Chart on page 3 of online article shows the very high IBD growth “ratings”, all in the 99th percentile.

Here is a quote from a different IBD article Many metrics of the real estate markets have recovered to pre-crash highs, but both risks and possibilities remain
Definitely worth researching the 1YPEG - which I don’t have time to do at the moment :wink: But I will challenge our new active board member Shuki to do it!

As of Friday, LGIH is one of only 4 sector leaders on the list after all the recent turmoil. (Others: AVGO, HAWK, PAYC) Chart note First test of 10 week line since Aug breakout over $20.20
http://stockcharts.com/freecharts/gallery.html?lgih

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10% promise. LGI Homes up 9.57% this morning. Doh!

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Interesting find, my first take on the numbers looked good. But my gut is screaming no way…

Numbers can look so good when they are growing from a tiny base. First quarter 2014 their closings were up over 90% they closed, wait for it… 485 homes. That is not a lot of customers… For the year 2014 they had fewer than 2400 customers. Think about that, they may be able to scale but do you want to put your capital at risk to see?

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<\I> Definitely worth researching the 1YPEG - which I don’t have time to do at the moment :wink: But I will challenge our new active board member Shuki to do it!

Sure, I will try to take a look at it this evening. I created an Excel Sheet that helps with all this tedious work.
It takes me about 15 minutes to do it.

Shuki

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Hi I looked at the published EPS for LGIH.
They have history og 1.5 years back only.
So I didn’t go through and calculated the iYPEG.
Though just from looking at the numbers it seems like they have a potential.

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They have history og 1.5 years back only.
So I didn’t go through and calculated the iYPEG.

Thanks, they are growing of a small base and are a small company, but they do seem to have potential. Nice couple of days were nice for the stock.