LGIH reports Jan home closings

Jan home closings
232 homes closed in January, up 51.6% from 153 in January last year.

Sounds good to me. Incredibly good in the face of all the gloom and doom which has pushed the stock price down to a PE of 9.8!!! Yes, that’s 9.8 !!!



Below is the running total and YoY increase by month since the beginning of 2014:

**2016	2015	2014	2015-2016	2014-2015**
JAN	232	 153	 119	51.6%	        28.6%
FEB		 220	 156	         	41.0%
MAR		 298	 210	        	41.9%
APR		 267	 191	        	39.8%
MAY		 255	 228	        	11.8%
JUN		 331	 243	        	36.2%
JUL		 311	 174	        	78.7%
AUG		 320	 183	        	74.9%
SEP		 303	 200	        	51.5%
OCT		 264	 241	        	 9.5%
NOV		 249	 165	        	50.9%
DEC		 433	 246	        	76.0%
TOTAL	4000(E)	3404	2356	17.5%(E)        44.5%


Why do you think the P/E’s are so low for LGIH and other home builders (like DHI) who have been growing rapidly?


Who knows what the market is thinking.
Though if I was to throw out a wild guess it would either be because of the fear of the loss of oil jobs in texas may hurt housing demand.
The earnings aren’t necessarily dropping down to the bottom line as cash on the balance sheet. It looks like the company is investing it all plus some with debt into buying new lots for future growth. Not necessarily a bad thing if kept in check.
The markets are just being crazy pricing most every small cap growth stocks at ridiculous valuation. This could possibly signal a great buying opportunity for those with a long term outlook.

Though as always do your own DD


Who knows what the market is thinking.

Don’t know what the market is thinking but this is what I see -

Oil has been crashing causing many distressed oil companies with ineffective hedges to be at serious risk of insolvency.

Lots of bank debt related to those oil companies is a big macro problem.

Rates are not rising and the fed cannot effect long term rates directly and the yield curves are falttening - more trouble for banks.

DB in Europe looks like their version of Lehman from 2008.

Tons of money flowing to Yen. That’s the carry trade unwind. Yen strength = risk off in equity assets

Could go on, but in that macro picture the selloff is quite sane for the market unfortunately… but the question is about the stocks/businesse itself so…

…That said, LGIH looks like its getting to the point of being a good deal. Most volume in the stock since IPO has traded in 17.5-19 range. If the business keeps performing well, I’d be surprised if the price goes much lower than where it is. The 19 level has shown sharp responsive buying in spite of broader selloffs suggesting that is where most LT holders consider it a great value.
May start accumulating some here.

Thanks, but the question was really about home builders as an industry…any idea why the average P/E is so low (compared to other industries)?

Ah, misunderstood the question… was looking for historical averages, but not finding anything on my quick search, but the sector is off about 20% YTD so that is a piece of it I’m sure.

In general its a more cyclical industry too so generally doesn’t lend itself to high PEs except in the upswing of cycles when they get into favor as I understand it. Only so fast you can grow when the growth is tied to building stuff that takes time to complete

Why do you think the P/E’s are so low for LGIH and other home builders (like DHI) who have been growing rapidly?

Hi Bear, I don’t know anything about DHI, but with LGIH, the fear has been that low oil prices must be making people reluctant to buy houses in Texas where LGIH has built 50% or so of their houses. Since they sold a lot of houses in the fourth quarter in spite of oil prices being low now for a year and a half or so, that prediction may not pan out. But who knows?


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