The analysts might have been a bit too bullish on LGI Homes, Inc. (NASDAQ:LGIH), given that the company fell short of expectations when it released its quarterly results last week. Results showed a clear earnings miss, with US$391m revenue coming in 4.0% lower than what the analystsexpected. Statutory earnings per share (EPS) of US$0.72 missed the mark badly, arriving some 28% below what was expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
After the latest results, the six analysts covering LGI Homes are now predicting revenues of US$2.68b in 2024. If met, this would reflect a solid 18% improvement in revenue compared to the last 12 months. Per-share earnings are expected to climb 13% to US$9.05. Before this earnings report, the analysts had been forecasting revenues of US$2.66b and earnings per share (EPS) of US$9.38 in 2024. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.
It might be a surprise to learn that the consensus price target was broadly unchanged at US$111, with the analysts clearly implying that the forecast decline in earnings is not expected to have much of an impact on valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. The most optimistic LGI Homes analyst has a price target of US$160 per share, while the most pessimistic values it at US$74.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. The analysts are definitely expecting LGI Homes' growth to accelerate, with the forecast 25% annualised growth to the end of 2024 ranking favourably alongside historical growth of 6.4% per annum over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 5.4% annually. Factoring in the forecast acceleration in revenue, it's pretty clear that LGI Homes is expected to grow much faster than its industry.
The Bottom Line
The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple LGI Homes analysts - going out to 2025, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 3 warning signs with LGI Homes (at least 1 which is significant) , and understanding these should be part of your investment process.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.