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LGI Homes, Inc. (NASDAQ:LGIH): What Does The Future Look Like?

Simply Wall St

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After LGI Homes, Inc.'s (NASDAQ:LGIH) earnings announcement in December 2018, it seems that analyst expectations are fairly bearish, with profits predicted to rise by 11% next year compared with the higher past 5-year average growth rate of 43%. Presently, with latest-twelve-month earnings at US$155m, we should see this growing to US$172m by 2020. In this article, I've outline a few earnings growth rates to give you a sense of the market sentiment for LGI Homes in the longer term. For those interested in more of an analysis of the company, you can research its fundamentals here.

See our latest analysis for LGI Homes

Can we expect LGI Homes to keep growing?

The view from 6 analysts over the next three years is one of positive sentiment. Given that it becomes hard to forecast far into the future, broker analysts tend to project ahead roughly three years. I've plotted out each year's earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of LGIH's earnings growth over these next few years.

NasdaqGS:LGIH Past and Future Earnings, April 2nd 2019

This results in an annual growth rate of 13% based on the most recent earnings level of US$155m to the final forecast of US$237m by 2022. This leads to an EPS of $9.41 in the final year of projections relative to the current EPS of $6.89. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 10% to 9.8% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you're building an investment case for a stock. For LGI Homes, I've put together three fundamental factors you should further examine:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for LGI Homes's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of LGI Homes? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.