LGI Homes, Inc. (LGIH) Bundle
Understanding LGI Homes, Inc. (LGIH) Revenue Streams
Understanding LGI Homes, Inc.’s Revenue Streams
The primary revenue source for the company is generated through home sales, specifically from delivering entry-level and move-up spec homes. The revenue is categorized into various reportable segments, including Central, Southeast, Northwest, West, and Florida.
Revenue Breakdown by Segment
| Segment | Home Sales Revenues (2024) | Home Sales Revenues (2023) | Change (%) |
|---|---|---|---|
| Central | $441,609,000 | $564,580,000 | -21.8% |
| Southeast | $407,068,000 | $397,618,000 | +2.4% |
| Northwest | $187,253,000 | $212,885,000 | -12.0% |
| West | $351,880,000 | $256,575,000 | +37.1% |
| Florida | $257,392,000 | $318,508,000 | -19.2% |
| Total | $1,645,202,000 | $1,750,166,000 | -6.0% |
Year-over-Year Revenue Growth Rate
For the three months ended September 30, 2024, home sales revenues amounted to $651,854,000, reflecting a year-over-year increase of 5.6% from $617,539,000 in 2023. The nine-month period ended September 30, 2024 showed a total revenue of $1,645,202,000, a decrease of 6.0% compared to $1,750,166,000 in 2023.
Contribution of Different Business Segments to Overall Revenue
The revenue contribution from different segments for the nine months ended September 30, 2024 is as follows:
- Central: 26.9%
- Southeast: 24.8%
- Northwest: 11.4%
- West: 21.4%
- Florida: 15.7%
Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- The Central segment saw a significant revenue drop of $123.0 million, attributed to a 20.9% decrease in the number of homes closed.
- The West segment experienced a marked increase of $95.3 million, driven by a 26.2% rise in homes closed.
- The Florida segment's revenue decreased by $61.1 million, primarily due to a 23.4% decline in homes closed.
Overall, the financial data indicates a mixed performance across segments, with some areas showing growth while others faced declines, impacting total revenue for the year.
A Deep Dive into LGI Homes, Inc. (LGIH) Profitability
Profitability Metrics
Profitability is a critical indicator of a company's financial health, and it encompasses several key metrics such as gross profit, operating profit, and net profit margins. For the nine months ended September 30, 2024, the company reported the following:
| Metric | Value (2024) | Value (2023) | Change (%) |
|---|---|---|---|
| Home Sales Revenues | $1,645,202,000 | $1,750,166,000 | -6.0% |
| Cost of Sales | $1,239,425,000 | $1,350,608,000 | -8.2% |
| Gross Margin | $405,777,000 | $399,558,000 | +1.6% |
| Gross Margin % | 24.7% | 22.8% | +1.9% |
| Operating Income | $166,559,000 | $173,413,000 | -4.0% |
| Net Income | $145,201,000 | $147,138,000 | -1.3% |
| Net Income Margin % | 8.8% | 8.4% | +0.4% |
In the third quarter of 2024, the company reported:
| Metric | Value (Q3 2024) | Value (Q3 2023) | Change (%) |
|---|---|---|---|
| Home Sales Revenues | $651,854,000 | $617,539,000 | +5.6% |
| Cost of Sales | $488,362,000 | $458,734,000 | +6.5% |
| Gross Margin | $163,492,000 | $158,805,000 | +2.2% |
| Gross Margin % | 25.1% | 25.7% | -0.6% |
| Operating Income | $80,305,000 | $82,276,000 | -2.4% |
| Net Income | $69,575,000 | $67,042,000 | +3.8% |
| Net Income Margin % | 10.7% | 10.8% | -0.1% |
Over time, the trends in profitability metrics indicate:
- Gross margin percentage increased from 22.8% to 24.7% over the nine months ended September 30, 2024.
- Operating income experienced a slight decrease of 4.0% compared to the previous year.
- Net income showed a marginal decline of 1.3% year-on-year, reflecting a stable profitability position despite challenges.
When comparing profitability ratios with industry averages, the company's net income margin of 8.8% remains competitive against other firms in the homebuilding sector.
In terms of operational efficiency:
- Cost management has been a focus, with a decrease in cost of sales by 8.2% compared to the previous year.
- General and administrative expenses increased, but as a percentage of home sales revenues, they were 5.5% in 2024 versus 4.8% in 2023, indicating a need for tighter cost control.
- Adjusted gross margin improved to 26.7% for the nine months ended September 30, 2024, reflecting a positive trend in operational efficiency.
Overall, the financial metrics and trends illustrate a company navigating a dynamic market while maintaining profitability through strategic management of costs and revenues.
Debt vs. Equity: How LGI Homes, Inc. (LGIH) Finances Its Growth
Debt vs. Equity: How LGI Homes, Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, the total long-term debt of the company was approximately $1.9 billion. Short-term debt stood at around $214 million.
Debt-to-Equity Ratio
The debt-to-equity ratio is a crucial metric for assessing financial leverage. As of September 30, 2024, the debt-to-equity ratio for the company was calculated at 0.95. This figure is below the industry average, which typically ranges from 1.0 to 1.5.
Recent Debt Issuances and Credit Ratings
In 2024, the company issued new debt amounting to $507.7 million under the 2023 Credit Agreement. The company has maintained a credit rating of Baa3 from Moody's, indicating moderate credit risk.
Balancing Debt and Equity Funding
The company has actively managed its capital structure by balancing debt and equity financing. In the recent nine months, the company repurchased approximately $18 million of common stock, reflecting a strategy to enhance shareholder value while maintaining a sustainable debt level.
| Financial Metric | Value (as of September 30, 2024) | Industry Average |
|---|---|---|
| Total Long-Term Debt | $1.9 billion | N/A |
| Short-Term Debt | $214 million | N/A |
| Debt-to-Equity Ratio | 0.95 | 1.0 - 1.5 |
| Recent Debt Issuance | $507.7 million | N/A |
| Credit Rating | Baa3 | N/A |
| Stock Repurchase Amount | $18 million | N/A |
Assessing LGI Homes, Inc. (LGIH) Liquidity
Assessing LGI Homes, Inc.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio was 3.02, indicating a strong liquidity position with current assets significantly exceeding current liabilities.
Quick Ratio: The quick ratio stood at 2.38, suggesting that even without inventory, the company can cover its short-term obligations comfortably.
Analysis of Working Capital Trends
Working capital as of September 30, 2024, was calculated as follows:
| Period | Current Assets ($ in thousands) | Current Liabilities ($ in thousands) | Working Capital ($ in thousands) |
|---|---|---|---|
| September 30, 2024 | 2,034,917 | 674,954 | 1,359,963 |
| September 30, 2023 | 1,996,963 | 614,476 | 1,382,487 |
Working capital decreased by 1.6% from the previous year, influenced by rising current liabilities, reflecting an increase in operational costs and investment activities.
Cash Flow Statements Overview
For the nine months ended September 30, 2024, cash flow trends were as follows:
| Cash Flow Type | 2024 ($ in thousands) | 2023 ($ in thousands) |
|---|---|---|
| Operating Activities | (200,700) | (22,700) |
| Investing Activities | (6,600) | (7,600) |
| Financing Activities | 219,300 | 45,300 |
Net cash used in operating activities increased significantly in 2024, primarily due to changes in inventory levels, while financing activities showed robust inflows driven by borrowings under the credit agreement.
Potential Liquidity Concerns or Strengths
Despite the increase in cash outflows from operations, the strong current and quick ratios indicate that the company maintains a healthy liquidity position. However, the significant cash used in operations raises potential concerns regarding operational efficiency and cost management going forward. The company has the ability to manage short-term obligations effectively, as reflected by its cash flow from financing activities, which was robust at $219.3 million for the nine months ended September 30, 2024.
Is LGI Homes, Inc. (LGIH) Overvalued or Undervalued?
Valuation Analysis
The valuation analysis of the company focuses on key financial ratios and metrics that help determine whether the company is overvalued or undervalued.
Price-to-Earnings (P/E) Ratio
The P/E ratio is a crucial metric for assessing valuation. As of the latest financial results, the diluted earnings per share (EPS) for the nine months ended September 30, 2024, was $6.15. The stock price is currently around $78.00, giving a P/E ratio of approximately 12.68.
Price-to-Book (P/B) Ratio
The P/B ratio provides insight into the market's valuation compared to the company's book value. The total equity as of September 30, 2024, was $1.996 billion, and with 27.63 million shares outstanding, the book value per share is approximately $72.30. Thus, the P/B ratio is about 1.08.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is another critical valuation metric. The enterprise value (EV) is calculated by adding market capitalization and total debt, then subtracting cash. With an EBITDA of $224.3 million for the nine months ended September 30, 2024, and an estimated EV of $2.4 billion, the EV/EBITDA ratio is approximately 10.68.
Stock Price Trends
Over the last 12 months, the stock has shown a 12% increase from its price of $69.00 a year ago to its current price of $78.00. The stock has fluctuated between a low of $62.00 and a high of $80.00 during this period.
Dividend Yield and Payout Ratios
Currently, the company does not pay a dividend, reflecting a dividend yield of 0%. The focus appears to be on reinvesting earnings into growth opportunities rather than returning capital to shareholders.
Analyst Consensus on Stock Valuation
According to the latest analyst reports, the consensus rating is a "Hold". Analysts suggest that while the stock is not significantly undervalued, the growth potential remains moderate given current market conditions.
| Metric | Value |
|---|---|
| P/E Ratio | 12.68 |
| P/B Ratio | 1.08 |
| EV/EBITDA Ratio | 10.68 |
| Current Stock Price | $78.00 |
| 12-Month Stock Price Change | 12% |
| Dividend Yield | 0% |
| Analyst Consensus | Hold |
Key Risks Facing LGI Homes, Inc. (LGIH)
Key Risks Facing LGI Homes, Inc.
Understanding the risk factors that affect the financial health of a company is crucial for potential investors. The following outlines the internal and external risks impacting the financial performance of the company.
Overview of Internal and External Risks
Various industry dynamics and operational challenges present significant risks, including:
- Industry Competition: The housing market is highly competitive, with numerous builders vying for market share, which can pressure profit margins.
- Regulatory Changes: Changes in zoning laws, building codes, and environmental regulations can increase costs and affect project timelines.
- Market Conditions: Economic fluctuations, including interest rates and housing demand, can impact sales and profitability.
Operational Risks
Operational risks are highlighted in recent earnings reports, including:
- Decrease in Home Sales Revenues: Home sales revenues for the nine months ended September 30, 2024, were $1.645 billion, a decrease of 6.0% from $1.750 billion for the same period in 2023.
- Homes Closed: Homes closed decreased by 9.6% to 4,495 homes from 4,971 homes.
- Average Sales Price: The average sales price per home closed increased by 4.0% to $366,007.
Financial Risks
The company faces several financial risks, including:
- Cost of Sales: Cost of sales for the nine months ended September 30, 2024, was $1.239 billion, a decrease of 8.2% from $1.350 billion for the same period in 2023.
- Net Income: Net income decreased by 1.3% to $145.2 million from $147.1 million.
- EBITDA Margin: EBITDA margin for the nine months ended September 30, 2024, was 13.6%, compared to 12.5% in the prior year.
Mitigation Strategies
To counter these risks, the company has implemented several strategies:
- Land Acquisition Policies: The company strategically evaluates new land deals to mitigate real estate inventory risks.
- Cost Management: Efforts to control costs have been a priority, with selling expenses increasing to $149.2 million for the nine months ended September 30, 2024, up from $141.8 million in the prior year.
Financial Snapshot
| Metric | 2024 | 2023 | Change (%) |
|---|---|---|---|
| Home Sales Revenues | $1.645 billion | $1.750 billion | -6.0% |
| Homes Closed | 4,495 | 4,971 | -9.6% |
| Average Sales Price | $366,007 | $352,075 | +4.0% |
| Net Income | $145.2 million | $147.1 million | -1.3% |
| EBITDA Margin | 13.6% | 12.5% | +1.1% |
Future Growth Prospects for LGI Homes, Inc. (LGIH)
Future Growth Prospects for LGI Homes, Inc.
Analysis of Key Growth Drivers
Key growth drivers for the company include:
- Product Innovations: The introduction of new home designs and energy-efficient building practices.
- Market Expansions: Entering new geographic markets such as the Northwest and Southeast regions.
- Acquisitions: Strategic acquisitions of land and existing home builders to enhance market share.
Future Revenue Growth Projections and Earnings Estimates
For the full year 2024, home sales revenues are projected to be approximately $2.2 billion, reflecting a growth of 4.5% year-over-year. Earnings per share are estimated to reach $6.50, up from $6.17 in 2023.
| Metric | 2023 Actual | 2024 Projected |
|---|---|---|
| Home Sales Revenues (in billions) | $2.1 | $2.2 |
| Earnings Per Share | $6.17 | $6.50 |
| Average Sales Price Per Home | $366,007 | $380,000 |
Strategic Initiatives or Partnerships That May Drive Future Growth
The company has partnered with local governments and housing authorities to promote affordable housing initiatives, which could lead to increased sales opportunities. Additionally, collaborations with technology firms to integrate smart home features into new builds are expected to attract a broader customer base.
Competitive Advantages That Position the Company for Growth
The company’s competitive advantages include:
- Strong Brand Recognition: Established reputation in the homebuilding market.
- Operational Efficiency: Streamlined construction processes that reduce costs and time-to-market.
- Diverse Product Offerings: A range of home models catering to different market segments, including entry-level and luxury homes.
Financial Performance Indicators
As of September 30, 2024, the company reported:
- Net income: $69.6 million, a 3.8% increase from the previous year.
- Operating income: $80.3 million, a decrease of 2.4% year-on-year.
- Gross margin: 24.7%, up from 22.8% in 2023.
| Financial Metric | 2023 | 2024 |
|---|---|---|
| Net Income (in millions) | $67.0 | $69.6 |
| Operating Income (in millions) | $82.3 | $80.3 |
| Gross Margin (%) | 22.8 | 24.7 |
LGI Homes, Inc. (LGIH) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- LGI Homes, Inc. (LGIH) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of LGI Homes, Inc. (LGIH)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View LGI Homes, Inc. (LGIH)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.