LGIH - LGI Homes: Not The Best Home For Your Money Heading Into Earnings

2024-02-16 23:32:53 ET

Summary

• LGI Homes experienced a decline in revenue and profits in 2023, despite an increase in the number of homes closed.
• The company's cancellation rates and net new orders have worsened, indicating potential weakness in the housing market.
• Analysts are forecasting higher revenue and profits for the final quarter of 2024, but there are concerns about the company's performance and valuation.

Last year was not a particularly pleasant year for the housing market. In particular, housing starts experienced a good amount of downside, falling about 8.8% compared to what they were in 2022. Fundamentally speaking, many of the businesses in that space suffered. However, signs of a quick turnaround began to emerge in early of last year, with a drop in cancellation rates and a growth in new orders leading the way. As a result of these improvements, I quickly became bullish on a number of companies in the space. This was especially true of those that were trading on a discount. Having said that, I was not bullish on all the players in the market. One company that I was more neutral on because of how shares were priced was LGI Homes ( LGIH )....

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