Hello Friends,

Monkey isn’t too good with numbers, so his abacus helped him calculate the following:

For the last 12 months, LGIH has made 0.57 (this quarter) + 0.69 + 0.76 + 0.66 bananas. The abacus says that’s a total of 2.68 bananas per each share you own of this company that builds and sells shelters for non-jungle dwellers.

Today on the open market, you can get yourself a share of this home-builder’s business for 26.68 as of this writing.

That means you are paying 26.68/ 2.68 or 9.95 times per banana of profit, or, in Wall Street-ease, the p/e is 9.95. That seems like not that much to pay considering the company is growing its profit in bushels.

If the p/e were to expand to, say, 12.5, which is still on the cheap-side of home builders–– 13.79 (Toll Brothers); 12.27 (Lennar); 14.69 (KB Home); 13.51 (D.R. Horton)––the share price would be 33.5 bananas.

So the difference between the current price and the price at a p/e of 12.5 is about a 21% increase. Which suggests to Monkey and his abacus that *if the p/e goes up to 12.5* then this will be a good investment, short-term.

**Any thoughts on what might allow for such a p/e expansion**?

Humbly Yours,

Monkey