Investment Thesis
LGI Homes is experiencing severe operational deterioration with revenue declining 22.6% YoY, net income collapsing 63% YoY, and negative free cash flow of -$56.2M. The company operates at a loss (-$582K operating income) with razor-thin 0.7% net margins while burning cash, leaving insufficient liquidity to service $1.7B debt burden in a weakening housing market.
Strengths
- 66.2% gross margin indicates pricing power or cost efficiency at production level
- Moderate leverage at 0.79x debt-to-equity provides some balance sheet cushion
- $2.1B equity base offers capital reserve against further deterioration
Risks
- Negative free cash flow of -$56.2M with only $60.9M cash creates liquidity crisis risk
- Operating loss and negative 17.6% FCF margin indicate unsustainable business trajectory
- 22.6% YoY revenue decline signals severe market share loss or housing demand collapse in operative builder sector
- $1.7B debt load becomes dangerous with negative operating cash flow and deteriorating profitability
Key Metrics to Watch
- Operating cash flow trend - must return positive to validate business sustainability
- Housing starts and order backlog - indicators of market recovery in operative builder segment
- Cash balance and debt covenant compliance - critical given cash burn rate
- Gross margin sustainability - monitor if further deterioration occurs below 66%
Financial Metrics
Revenue
319.7M
Net Income
2.2M
EPS (Diluted)
$0.09
Free Cash Flow
-56.2M
Total Assets
4.0B
Cash
60.9M
Profitability Ratios
Gross Margin
66.2%
Operating Margin
-0.2%
Net Margin
0.7%
ROE
0.1%
ROA
0.1%
FCF Margin
-17.6%
Balance Sheet & Liquidity
Current Ratio
N/A
Quick Ratio
N/A
Debt/Equity
0.79x
Debt/Assets
47.6%
Interest Coverage
N/A
Long-term Debt
1.7B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-06T13:21:03.504217 |
Data as of: 2026-03-31 |
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