LGIH
LGI Homes, Inc.
$46.11
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Undervalued
Trading 66.7% below fair value
You pay
$46.11
Bear
$101.48
Fair
$138.38
Bull
$175.29
Bear
$101.48
+120.1%
$10.05 × 14x + net cash
Fair
$138.38
+200.1%
$10.05 × 18x + net cash
Bull
$175.29
+280.2%
$10.05 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($10.05)
Implied Market Multiple
4.6x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $88.80 from 13 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $138.38 per share.
Warnings
This company has a built-in lending arm whose debt is mixed in with the main business. We capped the debt adjustment to avoid overstating what the core business owes.
Price-to-book value of 0.5x is below the typical low point. This could be a bargain, but check whether asset write-downs are coming.
Wall Street's average price target is $88.80 (from 13 analysts). Our estimate is 70% above the consensus -- consider that gap carefully.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing