Strong On High Volume: LGI Homes (LGIH)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified LGI Homes ( LGIH) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified LGI Homes as such a stock due to the following factors:

  • LGIH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $3.7 million.
  • LGIH has traded 120,849 shares today.
  • LGIH is trading at 6.21 times the normal volume for the stock at this time of day.
  • LGIH is trading at a new high 3.18% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on LGIH:

LGI Homes, Inc. designs, constructs, markets, and sells homes in Texas, Arizona, Florida, Georgia, New Mexico, Colorado, North Carolina, and South Carolina, the United States. The company was founded in 2003 and is headquartered in The Woodlands, Texas. LGIH has a PE ratio of 13. Currently there are 2 analysts that rate LGI Homes a buy, no analysts rate it a sell, and none rate it a hold.

The average volume for LGI Homes has been 160,500 shares per day over the past 30 days. LGI Homes has a market cap of $380.3 million and is part of the financial sector and real estate industry. Shares are up 30.5% year-to-date as of the close of trading on Tuesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates LGI Homes as a hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins.

Highlights from the ratings report include:
  • LGIH's very impressive revenue growth greatly exceeded the industry average of 7.6%. Since the same quarter one year prior, revenues leaped by 59.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • LGI HOMES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, LGI HOMES INC increased its bottom line by earning $1.33 versus $0.75 in the prior year. This year, the market expects an improvement in earnings ($1.93 versus $1.33).
  • The gross profit margin for LGI HOMES INC is currently lower than what is desirable, coming in at 27.12%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 6.38% is above that of the industry average.
  • The debt-to-equity ratio of 1.21 is relatively high when compared with the industry average, suggesting a need for better debt level management.

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