Valens Research Weekly Equity Idea Highlight for January 24, 2018 – LGI Homes, Inc.
This week the Valens Securities team highlights our most interesting equity insight from across our tools and our analysis.
Markets are expecting return and growth rates to collapse when age-wave macro factors, strong management alignment, execution, and overstated market concerns about operations point to upside
Current market expectations for LGIH are overly pessimistic. Markets expect UAFRS-based (Uniform) ROA to decline significantly with Asset’ growth also slowing dramatically. However, the company has seen fundamentals improving, implying the market is being too pessimistic. Also, the company is seeing a positive age-wave related macro-trend likely driving fundamentals and sustained growth, thanks to more millennials beginning to buy starter-homes, an area they are focusing in. All these factors point to fundamental improvements for the business the market is not pricing in.