LGIH · LGI Homes
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $49.96
Note written ·
Price against the kill line
17.4% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $49.96, on record since 11 November 2026. The shares are down 29.6% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $49.96, just over the 200-day average of closes, which would show the shares leading the S&P 500 and the lag call wrong. A raised 2026 closings outlook above the 4,600–4,800 range would point the same way.
Research onlyNot in the portfolio.
Catalyst
Key figures from the filings · Consumer Discretionary
Quarter to 30 September 2026, filed 3 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 445
- Revenue, change on a year (%)
- +10.2
- Gross margin (%)
- 20.1
- Operating margin (%)
- −0.2
- Free cash flow, four quarters ($M)
- 182
- Net cash, cash less debt ($M)
- −1,475
- Price to earnings (×)
- 13.5
- Enterprise value to operating income (×)
- 30.8
All filed numbers
What LGI Homes reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 445 | +10.2 | 20.1 | — |
| first filed | 516 | +5.7 | 19.7 | — |
| first filed | 320 | −9.0 | 18.7 | −0.2 |
| first filed restated | 404 | −38.1 | 21.6 | 5.3 |
| first filed restated | 488 | −19.0 | 22.5 | 8.1 |
| Pre-tax income ($M) | 33.3 |
| Net income ($M) four quarters: 71.0 | 24.6 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | +1.4 |
| Operating cash flow ($M) | 185 |
| Capital spending ($M) | 2.5 |
| Free cash flow ($M) | 182 |
| Cash and short-term investments ($M) | 69.4 |
| Debt ($M) notes | 1,545 |
| Net cash, cash less debt ($M) | −1,475 |
| Deferred revenue ($M) −0.4% on a year | 3.3 |
| Backlog, orders not yet delivered ($M) | Not reported |
| Receivables ($M) | Not reported |
| Inventory ($M) | Not reported |
| Shareholders' equity ($M) including non-controlling interests | 2,160 |
| Market value ($M) | 961 |
| Enterprise value, market value plus net debt ($M) | 2,436 |
| Enterprise value to sales (×) | Not available |
| Enterprise value to operating income (×) | 30.8 |
| Price to earnings (×) | 13.5 |
| Price to book value (×) | 0.4 |
| Free-cash-flow yield (%) | 19.0 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 14.2% of shares outstanding sold short, 8.7 days of average trading to cover, +0.7% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $0 |
| 12 monthsfrom | $0 | $2.6M |
The thesis
LGI Homes shares lean toward lagging the S&P 500 over the next three months because orders, the input to future closings, have collapsed while the shares have given back their post-earnings rise. The company reported 609 net orders for the quarter ended 30 September 2026, down 61.2% from 1,570 a year earlier (HousingWire, 3 November 2026). The November closings release, expected around 3 December 2026, and the Freddie Mac mortgage-rate readings settle whether demand is stabilising.
The shares closed at $41.12 on 12 November 2026. That is 31.2% lower over three months and 37.9% below the 52-week high of $66.25 (intraday, 26 June 2026). The market priced the third-quarter margin and closings results as relief; the close of $47.15 on 5 November 2026 was followed by lower closes on 10 November 2026, 11 November 2026 and 12 November 2026.
LGI reported 297 home closings for October 2026, including 9 leased homes, with 151 active selling communities at 31 October 2026 (LGI Homes release, 4 November 2026). Management had guided to about 300 on the earnings call. October 2025 closings were 395 (LGI release, 5 November 2025).
Bullish and bearish views on LGI Homes, Inc.
The bull case on LGI Homes, Inc. (LGIH), in brief: margins held inside guidance: Third-quarter homebuilding gross margin was 20.2% and adjusted gross margin 23.7%, both up 40 basis points from the second quarter (Builder Online, 3 November 2026). The bear case: orders fell sharply: Third-quarter net orders were 609 against 1,570 a year earlier, and nine-month orders were 2,869 against 4,098 (HousingWire and LGI 8-K, 3 November 2026).
Bull case
- Margins held inside guidance: Third-quarter homebuilding gross margin was 20.2% and adjusted gross margin 23.7%, both up 40 basis points from the second quarter (Builder Online, 3 November 2026). The full-year ranges of 19%–21% and 22.5%–24.5% were kept.
- Closings and revenue still grew: Third-quarter closings were 1,222 homes, up 10.4%, and homebuilding revenue was $437.5 million, up 10.3% (LGI 8-K, 3 November 2026). Net income was $24.6 million, or $1.05 per share.
- Community growth has a target: Management set a first-ever goal of more than 180 active communities by the end of 2027, against 151 at 30 September 2026 (HousingWire, 3 November 2026). More communities add selling points without needing a demand recovery.
- October closings met guidance: The 297 closings reported on 4 November 2026 matched the roughly 300 management guided to on 3 November 2026.
- Liquidity is adequate: Liquidity was $447.7 million at 30 September 2026, including $69.4 million of cash and $378.3 million of revolver availability. Net debt to capital was 40.6% (LGI 8-K).
Bear case
- Orders fell sharply: Third-quarter net orders were 609 against 1,570 a year earlier, and nine-month orders were 2,869 against 4,098 (HousingWire and LGI 8-K, 3 November 2026). The nine-month cancellation rate was 48.9% against 28.1%.
- Backlog is thin: Backlog was 685 homes worth $273.7 million at 30 September 2026, down 47.5% in units from a year earlier. It was 1,298 homes at 30 June 2026, so future closings rest on a shrinking pipeline.
- October closings fell from a year earlier: LGI closed 297 homes in October 2026 against 395 in October 2025 (LGI releases, 4 November 2026 and 5 November 2025). Third-quarter closings had grown 10.4%.
- Closings guidance was narrowed at the top: Full-year closings guidance was cut to 4,600–4,800 homes from 4,600–5,400 on 3 November 2026.
- Analysts cut 2027 estimates: Wolfe Research kept a Peer Perform rating and cut its 2027 earnings estimate by 30.1%, from $3.42 to $2.39 per share, citing absorption of about 1.3 homes per community per month (HousingWire, 3 November 2026). It flagged that faster sales may require incentives that erode margins.
Price setup
The shares closed at $41.12 on 12 November 2026, below the 50-day average of $46.52 and the 200-day average of $49.92, both of adjusted closes as of that session. The close is also below the 27 October 2026 close of $42.77 and the 14 October 2026 close of $42.35, the recent lows that held before the earnings report.
The 52-week closing low is $34.24, set on 20 March 2026. The 52-week high is $66.25, set intraday on 26 June 2026.
The post-report rise peaked at a close of $47.15 on 5 November 2026. The close of $46.60 on 9 November 2026 was followed by three lower closes, which returned the shares to the pre-report range. No company report sits inside the next 30 days; the November closings release is the next company datapoint.
Catalysts ahead
- 19 November 2026: Freddie Mac weekly 30-year mortgage rate (also ~25 November 2026). The rate was 7.32% on 22 October 2026; its direction sets sentiment for the builder group and for entry-level demand.
- ~3 December 2026 (est.): LGI November home-closings release. Shows whether closings growth, 10.4% in the third quarter, stays below the year-earlier level as the 297 in October against 395 did.
- ~February 2027 (est.): LGI fourth-quarter and full-year 2026 report. Tests the 4,600–4,800 closings range and whether net orders recover from the third-quarter low of 609.
What would change the view
A daily close above $49.96, just over the 200-day average of closes, which would show the shares leading the S&P 500 and the lag call wrong. A raised 2026 closings outlook above the 4,600–4,800 range would point the same way.
What it trades with
LGI is a high-beta small-cap builder that moves with Lennar, D.R. Horton, PulteGroup, NVR and KB Home on mortgage-rate headlines. Lennar reported third-quarter orders down 9% on 16 September 2026 and KB Home reported orders down 12% on 22 September 2026. LGI's order decline of 61.2% is far larger than either.
The Freddie Mac 30-year rate and the 10-year Treasury yield are the closest outside drivers. The Freddie Mac rate was 7.32% on 22 October 2026.
The evidence, claim by claim (8)
- Third-quarter 2026 net orders were 609, down 61.2% from 1,570; cancellation rate 53.8% versus 33.6%; backlog 685 homes, down 47.5%. HousingWire, LGI third-quarter 2026 coverage · as of
- Third-quarter 2026 homebuilding revenue $437.5 million (up 10.3%), closings 1,222 including leased homes (up 10.4%), homebuilding gross margin 20.2%, adjusted 23.7%, net income $24.6 million ($1.05 per share). LGI Homes 8-K earnings release, third quarter 2026 · as of
- October 2026 closings were 297, including 9 currently or previously leased homes; 151 active selling communities at 31 October 2026. LGI Homes October 2026 home closings release · as of
- Fiscal 2026 closings guidance narrowed to 4,600–4,800 homes from 4,600–5,400; margin ranges of 19%–21% and 22.5%–24.5% kept. LGI Homes 8-K earnings release, third quarter 2026 · as of
- Liquidity of $447.7 million, including $69.4 million cash and $378.3 million revolver availability; net debt to capital 40.6%. LGI Homes 8-K earnings release, third quarter 2026 · as of
- Wolfe Research kept Peer Perform and cut its 2027 earnings estimate 30.1%, from $3.42 to $2.39 per share. HousingWire · as of
- Management targets more than 180 active communities by the end of 2027; 151 were active at 30 September 2026. HousingWire; LGI Homes 8-K · as of
- Close of $41.12 on 12 November 2026; 50-day average of closes $46.52, 200-day average $49.92; three-month price change −31.2%. Adjusted daily closes · as of
Sources
- LGI Homes, Inc. Reports October 2026 Home Closings · nasdaq.com ·
- SEC EDGAR
- LGI earnings leadership test · housingwire.com
- LGI Homes Posts Q3 Gains Despite Slower Sales Activity · builderonline.com
- MarketBeat ·
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