SKY - Legacy Housing: An Affordable High-Quality Manufactured Home Builder

2024-06-13 07:23:59 ET

Summary

• Legacy Housing is a low-price manufactured home builder in an industry that itself is an affordable alternative to site-built housing.
• LEGH, with its vertically integrated operations, operates with higher margins and trades at a lower multiple compared to its peers.
• The company has a healthy portfolio of loans that protects the downside.

Investment Thesis

The Legacy Housing Corporation ( LEGH ) is one of the biggest manufactured home builders in the country. Compared to its peers, Legacy Housing has higher margins yet lower multiples. My analysis (which is shared in this article) shows that the company is trading near its book value, which mostly consists of healthy loans. My conservative valuation arrives at a +80% upside. So I think we're having an asymmetry bet here that the downside is protected while there is a long runway for the upside. That's why I suggest a "Buy" rating on this Stock.

Company Overview

Manufactured homes are a more affordable alternative to site-built housing. The industry was at its peak in the mid-90s and in decline since 2000 as the interest rates were in decline and stationary-built housing was more affordable which led to less desire for mobile homes. The following figure shows this decline in mobile home shipments as a percentage of total housing units....

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