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Investors Who Bought LGI Homes (NASDAQ:LGIH) Shares Five Years Ago Are Now Up 368%

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LGI Homes, Inc. (NASDAQ:LGIH) shareholders might be concerned after seeing the share price drop 15% in the last month. But that doesn't change the fact that the returns over the last half decade have been spectacular. In that time, the share price has soared some 368% higher! So we don't think the recent decline in the share price means its story is a sad one. But the real question is whether the business fundamentals can improve over the long term.

View our latest analysis for LGI Homes

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During five years of share price growth, LGI Homes achieved compound earnings per share (EPS) growth of 40% per year. This EPS growth is reasonably close to the 36% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
earnings-per-share-growth

We know that LGI Homes has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling LGI Homes stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

It's good to see that LGI Homes has rewarded shareholders with a total shareholder return of 89% in the last twelve months. That's better than the annualised return of 36% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand LGI Homes better, we need to consider many other factors. Even so, be aware that LGI Homes is showing 1 warning sign in our investment analysis , you should know about...

But note: LGI Homes may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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