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LGI Homes (LGIH) Soars to 52-Week High, Time to Cash Out?

Shares of LGI Homes (LGIH) have been strong performers lately, with the stock up 8.1% over the past month. The stock hit a new 52-week high of $104.49 in the previous session. LGI Homes has gained 37.5% since the start of the year compared to the -19.5% move for the Zacks Finance sector and the -30.9% return for the Zacks Real Estate - Development industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on May 5, 2020, LGI Homes reported EPS of $1.67 versus consensus estimate of $1.3 while it beat the consensus revenue estimate by 6.36%.

For the current fiscal year, LGI Homes is expected to post earnings of $7.49 per share on $2.04 billion in revenues. This represents a 6.7% change in EPS on a 11.03% change in revenues. For the next fiscal year, the company is expected to earn $8.7 per share on $2.29 billion in revenues. This represents a year-over-year change of 16.15% and 11.99%, respectively.

Valuation Metrics

LGI Homes may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

LGI Homes has a Value Score of C. The stock's Growth and Momentum Scores are A and D, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 13X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 12.4X versus its peer group's average of 8.6X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, LGI Homes currently has a Zacks Rank of #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if LGI Homes passes the test. Thus, it seems as though LGI Homes shares could still be poised for more gains ahead.

How Does LGI Homes Stack Up to the Competition?

Shares of LGI Homes have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also impressive, including Corporate Office Properties Trust (OFC), Omega Healthcare Investors (OHI), and FirstService (FSV), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

However, it is worth noting that the Zacks Industry Rank for this group is in the bottom half of the ranking, so it isn't all good news for LGI Homes. Still, the fundamentals for LGI Homes are promising, and it still has potential despite being at a 52-week high.

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LGI Homes, Inc. (LGIH): Free Stock Analysis Report
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