Yahoo Finance LGI Homes (NASDAQ:LGIH) sheds 4.4% this week, as yearly returns fall more in line with earnings growth
It might be of some concern to shareholders to see the LGI Homes, Inc. (NASDAQ:LGIH) share price down 16% in the last month. But at least the stock is up over the last five years. In that time, it is up 84%, which isn't bad, but is below the market return of 94%.
In light of the stock dropping 4.4% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.
Check out our latest analysis for LGI Homes
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, LGI Homes managed to grow its earnings per share at 4.2% a year. This EPS growth is slower than the share price growth of 13% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into LGI Homes' key metrics by checking this interactive graph of LGI Homes's earnings, revenue and cash flow.
A Different Perspective
LGI Homes provided a TSR of 1.2% over the last twelve months. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 13% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand LGI Homes better, we need to consider many other factors. Case in point: We've spotted 3 warning signs for LGI Homes you should be aware of, and 1 of them can't be ignored.
We will like LGI Homes better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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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.
