LGIH - LGI Homes: Despite Discount Valuation Underperformance Warrants Caution

2024-06-24 10:48:08 ET

Summary

• LGI Homes stock sits at a post-earnings low despite reiterated guidance.
• Margin improvements are anticipated, but not enough to reverse the downtrend with revenue growth slower than community count growth.
• Valuation close to recession pricing, potential trade opportunity in October/November, but further near-term downside risk and lack of buyback support.

I took fresh interest in LGI Homes ( LGIH ) because the homebuilder reiterated guidance for the current fiscal year; yet the stock subsequently dropped 6.4% anyway. A spirited rebound ensued and now, at the time of writing, LGIH is right back to its post-earnings closing low. Overall, LGIH has been an underperforming stock suffering from a year-to-date downtrend, even as the iShares U.S. Construction ETF ( ITB ) is flat on the year....

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