LGI Homes (LGIH:NAS) Fundamental Valuation Report

LGI Homes (LGIH:NAS) Fundamental Valuation Report

Fundamental Valuation Report

LGI Homes(LGIH:NAS)

Consumer Cyclical:Residential Construction

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$172.11 (USD) 05/05/2021

Weighted Valuation
$141.00 (USD)

Overall Rating
Overvalued by 18.1%

Valuation Models Comparables: $82.65 (USD)
(in order of importance) Multiples: $135.51 (USD)
Discounted Cash Flow: $120.39 (USD)
Valuation Methods This company is:
Cash Flow: Overvalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation
According to Analyst consensus at $141.00 this stock is Overvalued

Company Overview (LGIH:NAS USD)

Price 172.11
Range 167.69 – 176.66
52 week 66.67 – 174.62
Open 176.20
Vol / Avg. 466405/270754
Mkt cap 4.29B
P/E 13.49
Div/yield 0.00/0.00
EPS 12.76
Shares 24.86M
Beta 1.57

Company Description

LGI Homes Inc is engaged in the design, construction, and sale of new homes in markets. The company current product offerings include entry-level homes, including both detached homes and townhomes, and move-up homes sold, which are sold under LGI Homes brand, and luxury series homes, which are sold under the Terrata Homes brand. It offers a set number of floor plans in each community with features that include upgrades, such as granite countertops, appliances, and ceramic tile flooring.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for LGIH:NAS

Using a discounted cash flow model we generated an intrinsic value of $120.39 (USD) for LGIH:NAS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

LGIH:NAS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $120.39 1% 5% 1% 5%
WACC (or Ke) 8.89 $148.67 $100.34
Terminal Growth Rate 3.00 $101.51 $146.99
Tax Rate 0.12 $135.30 $105.49
Cash Flow 482,040,000 $107.24 $133.54
Capital Expenditures -1,028,200 $120.37 $120.42
Long Term Debt 354,932,000 $121.10 $119.68

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $116.96 (USD) for LGIH:NAS. We also generated a valuation of $82.65 (USD) using other metrics and comparables.
The comparable companies were Century Communities (CCS:NYS), Taylor Morrison Home (TMHC:NYS), Tri Pointe Homes (TPH:NYS), Green Brick Partners (GRBK:NAS) and Toll Brothers (TOL:NYS).

Company LGIH:NAS End Date Value
Earnings/Share $12.76 (USD)
Book Value/Share $45.68 (USD)
Sales/Share $93.30 (USD)
Cash Flow/Share $7.97 (USD)
EBITDA/Share $14.52 (USD)
Price Based on Comps Adjustment Factor (%)
$149.22 (USD) -52.0
$73.00 (USD) 78.9
$88.69 (USD) -56.3
$68.05 (USD) 0.0
$161.35 (USD) 81.8
LGIH:NAS Ratios Used Average Values CCS:NYS TMHC:NYS TPH:NYS GRBK:NAS TOL:NYS
13.49 PE Ratio 11.69 9.38 10.73 9.82 10.94 17.61
3.76 PB Ratio 1.60 1.92 1.12 1.31 1.94 1.70
1.84 PS Ratio 0.95 0.74 0.66 0.92 1.28 1.16
21.61 PCF Ratio 11.23 5.88 4.50 4.42 35.46 5.92
13.02 EV to EBITDA 11.11 8.69 11.65 8.15 11.99 15.08

Multiples

Using a multiples approach we generated a valuation of  $135.51 (USD) for LGIH:NAS

Company LGIH:NAS End Date Value
Earnings/Share $12.76 (USD)
Book Value/Share $45.68 (USD)
Sales/Share $93.30 (USD)
Cash Flow/Share $7.97 (USD)
EBITDA/Share $14.52 (USD)
Price Based on Comps Adjustment Factor
$144.62 (USD) 0
$110.35 (USD) 0
$104.33 (USD) 0
$159.38 (USD) 0
$158.86 (USD) 0
Ratios Ratio Average
PE Ratio 11.33
PB Ratio 2.42
PS Ratio 1.12
PCF Ratio 20.01
EV to EBITDA 10.94

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  LGIH:NAS for the last 8 years was  2.31

We ran the Adjusted Book Value for  LGIH:NAS and generated a book value of  $45.59 (USD)
By multiplying these we get an adjusted valuation of  $105.38 (USD)

Analyst Data

In the Stockcalc database there are 1 analysts that provide a valuation for LGIH:NAS. The 1 analysts have a concensus valuation for LGIH:NAS for 2021 of $141.00 (USD).

LGIH:NAS LGI Homes

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
1 0 0 5.0000 Buy 2021-5-4

Current Price: 172.11 USD

Analyst Consensus
USD Millions 2021 2022 2023
Mean EPS 14.72 17.01 14.40
# EPS Analysts 2 2 1
Mean Revenue 2,997.00 3,448.20 3,103.60
# Revenue Analysts 2 2 1
Mean Target Price 141.00
Mean Cash Flow 12.22 13.46 14.64
Mean EBITDA 385.70 430.40 468.00
Mean Net Income 303.80 334.40 363.40
Mean Debt Outstanding
Mean Tax Rate
Mean Growth Rate
Mean Capital Expenditure 2.70 3.00 6.20

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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