New Recommendations
Southwest (19%): The Southwest is LGI’s second largest divi-
For aggressive Investors
LGI Homes, Inc.
Recent Price: $62.28 Traded: NDQ-LGIH
Current dividend Yield: Nil
2021-23 Projected Valuation
Revenues: $2.5 billion
Earnings Per Share: $10.00
Three- to Five-Year Price Target: $130
Company Website: www.lgihomes.com
Business Overview
LGI Homes is engaged in the design, construction, market-
ing and sale of new homes in markets in Texas, Arizona,
Florida, Georgia, New Mexico, South Carolina, North
Carolina, Colorado, Washington, Tennessee, Minnesota,
Oklahoma, and Oregon. The company’s six reportable op-
erating segments are based on region and include Central,
Southwest, Southeast, Florida, Northwest, and Midwest.
Since commencing homebuilding operations in 2003, LGI
has constructed and closed over 23,000 homes, including
1,244 closings during the first quarter of 2018. The company
sells homes under its LGI Homes and Terrata Homes brands.
The former primarily markets to entry-level or first-time
buyers, while the latter caters to the move-up demographic
and tends to offer more luxurious amenities. As of March
31, 2018, the homebuilder maintained 79 active communi-
ties, of which six were Terrata communities. LGI Homes was
incorporated on June 26, 2013 and is headquartered in The
Woodlands, Texas.
Operating Segments
Central (39% of revenue): LGI’s cornerstone Central divi-
sion is comprised mainly of homes built in Texas, with the
majority of its exposure in the Houston, Dallas/Fort Worth,
San Antonio, and Austin markets. The only non-Texan is
Oklahoma City, OK, where LGI closed its first home earlier
this year. In the first quarter of 2018, the company reported
521 closings in the Central region with an average-selling
price of $206,330, up from 315 and $206,089 in the com-
parable year-ago period. The active community count rose
from 24 to 29.
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sion and is comprised of homes built in Arizona, Colorado,
and New Mexico. Key markets include Phoenix, AZ, Tucson,
AZ, Denver, CO, Colorado Springs, CO, and Albuquerque,
NM. In the first quarter of 2018, the company reported 197
closings in the Southwest region with an average selling price
of $275,548, up from 132 and $250,955 in the comparable
year-ago period. The active community count declined from
17 to 14.
Southeast (16%): The Southeast division is largely focused
on North Carolina, with significant exposure to the Char-
lotte, Raleigh, and Winston-Salem markets. The Southeast
also includes homes built in Atlanta, GA and the fast-
growing Nashville, TN market. In the first quarter of 2018,
the company reported 229 closings in the Southeast region
with an average-selling price of $196,978, up from 151 and
$184,417 in the comparable year-ago period. The active
community count rose from 13 to 17.
Florida (15%): Activity in Florida is so significant that it
warranted its own category. Much like Texas did before
Oklahoma City’s arrival earlier this year (Central division was
referred to as Texas division prior to 2018). Florida’s key mar-
kets include Tampa, Orlando, Fort Myers, and Jacksonville.
In the first quarter of 2018, the company reported 209 clos-
ings in Florida with an average-selling price of $203,077, up
from 123 and $196,748 in the comparable year-ago period.
The active community count rose from 11 to 12.
Northwest (11%): The Northwest division is comprised of
two major markets, Seattle, WA and Portland, OR. In the
first quarter of 2018, the company reported 88 closings in the
Northwest region with an average-selling price of $337,409,
up from 40 and $320,500 in the comparable year-ago period.
The active community count rose from 4 to 6.
Midwest (N/A). The Midwest division consists of one com-
munity in Minneapolis, MN. However, it’s still in a start-up
phase so there were no reported closings or revenues in the
first quarter. On the conference call, management indicated
that sales activity would likely begin in the June period.
Environment
The U.S. housing market is booming right now and many
of the nation’s top homebuilders are reaping the rewards.
(cont. on page 7)
June 2018 The Value Line Special Situations Service 5
 New Recommendations

LGI HOMES, INC. NDQ--LGIH RECENT

PRICE P/E RATIO 11.4 P/E RATIO 0.56 YLD
60.73 TRAILING RELATIVE DIV’D
Nil VALUE
LINE
RANKS 18.85
12.01
22.21
13.50
36.07
12.21
40.47
18.74
77.95
26.82
81.88
55.34
High
Low
PERFORMANCE 2 Above
Average LEGENDS
12 Mos Mov Avg
Technical 3 Average . . . . Rel Price Strength
Shaded area indicates recession 50
SAFETY 4 Below
Average

BETA 1.40 (1.00 = Market)

25

15
Financial Strength B
10
Price Stability 15

Price Growth Persistence NMF 5

11300
Earnings Predictability NMF VOL.
(thous.)

© VALUE LINE PUBLISHING LLC 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018/2019
SALES PER SH -- -- -- -- 7.84 19.31 31.09 39.34 57.58
‘‘CASH FLOW’’ PER SH -- -- -- -- 1.09 1.46 2.65 3.57 5.22
EARNINGS PER SH -- -- -- -- .34 1.33 2.44 3.41 4.73 6.45 A,B/7.39 C
DIV’DS DECL’D PER SH -- -- -- -- -- -- -- -- --
CAP’L SPENDING PER SH -- -- -- -- .03 .06 .06 .03 .02
BOOK VALUE PER SH -- -- -- -- 7.92 9.19 12.20 16.67 22.42
COMMON SHS OUTST’G (MILL) -- -- -- -- 20.76 19.85 20.27 21.31 21.85
AVG ANN’L P/E RATIO -- -- -- -- 46.2 13.1 8.7 8.6 9.1 9.4/8.2
RELATIVE P/E RATIO -- -- -- -- 2.60 .69 .45 .47 .46
AVG ANN’L DIV’D YIELD -- -- -- -- -- -- -- -- --
SALES ($MILL) -- -- -- -- 162.8 383.3 630.2 838.3 1258.0 Bold figures
OPERATING MARGIN -- -- -- -- 7.6% 11.3% 12.8% 13.4% 13.6% are consensus
DEPRECIATION ($MILL) -- -- -- -- .3 .8 .9 1.1 .8 earnings
NET PROFIT ($MILL) -- -- -- -- 22.3 28.2 52.8 75.0 113.3 estimates
INCOME TAX RATE -- -- -- -- 4.7% 34.5% 34.2% 34.0% 33.9% and, using the
NET PROFIT MARGIN -- -- -- -- 13.7% 7.4% 8.4% 9.0% 9.0% recent prices,
WORKING CAP’L ($MILL) -- -- -- -- 147.1 373.6 526.3 736.1 935.2 P/E ratios.
LONG-TERM DEBT ($MILL) -- -- -- -- -- 216.1 308.2 400.5 475.2
SHR. EQUITY ($MILL) -- -- -- -- 164.4 182.5 247.4 355.2 489.8
RETURN ON TOTAL CAP’L -- -- -- -- 14.0% 7.8% 10.8% 11.2% 13.0%
RETURN ON SHR. EQUITY -- -- -- -- 13.6% 15.5% 21.4% 21.1% 23.1%
RETAINED TO COM EQ -- -- -- -- 8.0% 15.5% 21.4% 21.1% 23.1%
ALL DIV’DS TO NET PROF -- -- -- -- 41% -- -- -- --
ANo. of analysts changing earn. est. in last 3 days: 1 up, 2 down, consensus 5-year earnings growth 11.0% per year. BBased upon 4 analysts’ estimates. CBased upon 4 analysts’ estimates.

ANNUAL RATES
ASSETS ($mill.) 2016 2017 3/31/18
INDUSTRY: Homebuilding
of change (per share) 5 Yrs. 1 Yr. Cash Assets 49.5 67.6 52.0
Sales -- 46.5% Receivables 17.1 44.7 21.7 BUSINESS: LGI Homes, Inc. is engaged in the design,
‘‘Cash Flow’’ -- 46.0% Inventory 717.7 918.9 1040.3
Earnings -- 38.5% construction, marketing, and sale of new homes in markets
Other 10.6 18.9 .0
Dividends -- -- in Arizona, Colorado, Florida, Georgia, New Mexico, North
Current Assets 794.9 1050.1 1114.0
Book Value -- 34.5% Carolina, South Carolina, and Texas. Its core markets
Fiscal QUARTERLY SALES ($mill.) Property, Plant
Full
include Houston, San Antonio, Dallas/Fort Worth, Austin,
Year 1Q 2Q 3Q 4Q & Equip, at cost
Year 4.4 4.8 -- Phoenix, Tucson, Tampa, Orlando, Atlanta, Albuquerque,
Accum Depreciation 2.4 3.1 --
12/31/15 120.7 158.8 174.0 176.7 630.2 Net Property 2.0 1.7 1.6
Denver, and Charlotte. Since commencing home building
12/31/16 162.5 222.7 216.3 236.8 838.3 Other 17.6 28.1 55.3 operations in 2003, LGI constructed and closed over 23,000
12/31/17 162.9 324.2 365.9 405.0 1258.0 Total Assets 814.5 1079.9 1170.9 homes. During the three months ended March 31, 2018 , it
12/31/18 279.0 had 1,244 home closings. Its spacious new home commu-
LIABILITIES ($mill.) nities are rich in amenities like playgrounds, trails, commu-
Fiscal EARNINGS PER SHARE Full Accts Payable 12.3 12.0 25.7
Year 1Q 2Q 3Q 4Q Year Debt Due .0 .0 .0 nity sporting areas, and even fishing lakes to give home-
12/31/14 .22 .43 .34 .34 1.33 Other 46.5 102.9 30.1 owners the rewards of neighborhood living, while providing
12/31/15 .33 .66 .76 .75 2.44 Current Liab 58.8 114.9 55.8 them with convenient access to the nearby city. The com-
12/31/16 .58 .96 .86 1.01 3.41 pany sells homes under the LGI Homes and Terrata Homes
12/31/17 .51 1.39 1.40 1.43 4.73 brands. The 79 active communities at March 31, 2018
12/31/18 1.10 1.66 1.77 1.98 LONG-TERM DEBT AND EQUITY included six Terrata Homes communities. Has 726 employ-
as of 3/31/18
Cal- QUARTERLY DIVIDENDS PAID Full ees. Chairman & C.E.O.: Eric Thomas Lipar. Address: 1450
endar 1Q 2Q 3Q 4Q Year Total Debt $571.7 mill. Due in 5 Yrs. NA Lake Robbins Drive,Suite 430, The Woodlands, TX 77380.
2015 -- -- -- -- -- LT Debt $571.7 mill. Tel.: (281) 362-8998. Internet: www.lgihomes.com.
Including Cap. Leases NA
2016 -- -- -- -- -- (52% of Cap’l) J.V.
2017 -- -- -- -- -- Leases, Uncapitalized Annual rentals NA
2018 -- June 15, 2018
Pension Liability None in ’17 vs. None in ’16
INSTITUTIONAL DECISIONS TOTAL SHAREHOLDER RETURN
3Q’17 4Q’17 1Q’18 Pfd Stock None Pfd Div’d Paid None Dividends plus appreciation as of 5/31/2018
to Buy 84 82 121
Common Stock 22,615,000 shares 3 Mos. 6 Mos. 1 Yr. 3 Yrs. 5 Yrs.
to Sell 74 72 81 (48% of Cap’l)
Hld’s(000) 22223 19131 20360 7.63% -13.25% 87.99% 223.13% --
© 2018 Value Line, Inc. All rights reserved. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind.
THE PUBLISHER IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS HEREIN. This publication is strictly for subscriber’s own, non-commercial, internal use. No part To subscribe call 1-800-VALUELINE
of it may be reproduced, resold, stored or transmitted in any printed, electronic or other form, or used for generating or marketing any printed or electronic publication, service or product.

6 The Value Line Special Situations Service June 2018 to subscribe call 1-800-VALUELINE   •  www.valueline.com
 New Recommendations
(cont. from page 5)
Favorable macroeconomic trends, including rock solid
employment metrics, improved wages, and growing house-
hold income, coupled with historically low interest rates,
have been key catalysts which many believe will continue to
fuel growth over the next several years. The prospect of the
millennial generation getting more involved in the home
buying process could provide another significant tailwind to
the homebuilding industry going forward. Thus far, figures
have shown that this demographic has been reluctant to settle
down and buy homes compared to previous generations,
and when they do, the purchases tend to be at a lower price
point. Some speculate this tentativeness could stem from
the recession of 2009, when the housing market’s cloak of
invincibility seemed to take a hit. Regardless, millennials are
the largest population demographic since the Baby Boomers
and if they can put the fears from 2009 behind them, the
opportunity for homebuilders could be substantial.
On that note, this is what adds to our current interest in
LGI Homes. While LGI lacks the size and scale of some of
its competitors, the company’s business model is heavily
weighted to first-time homebuyers seeking affordable hous-
ing. Given its small size and attractive valuation, we believe
LGIH shares may offer more upside than some of the larger
players, especially if the millennial home buying trend con-
tinues to gain traction.
Recent Results
LGI reported first-quarter earnings of $1.10 a share, more
than doubling the $0.52 it tallied in the comparable year-
ago period. The sharp increase in profits was driven by a
63.5% surge in home closings (to 1,244), a 4.8% uptick
in the average selling price (to $224,300), and a significant
reduction in the effective tax rate, owing to U.S. tax reform.
On the top line, revenues soared 71.3% year over year, to
$279 million, highlighted by double-digit growth across all
major operating segments; Central (+65.6%), Southwest
(+63.9%), Southeast (+62.0%), Florida (+75.4%), and
Northwest (+131.6%). While Texas, aka Central, remains
LGI’s bread and butter, accounting for roughly 40% of total
revenue, strong growth in its complementary markets was an
encouraging sign that management is pushing hard to diver-
sify the portfolio. Despite selling homes at lower price points,
LGI’s gross margin also held up pretty well and still ranks
near the higher end of the industry in terms of profitability.
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Outlook
On the Q1 conference call, management guided for earnings
in a range of $6.00-$7.00 a share, gross margin of 24%-
26%, and adjusted gross margin of 25.5%-27.5%, with
capitalized interest accounting for substantially all of the
margin difference. Moreover, the company forecasts total
homes closings of 6,000-7,000 and average selling price to
be between $220,000 and $230,000. It anticipates having
85 and 90 active selling communities by year’s end, with
planned expansion into the Sacramento, CA, Birmingham,
AL, and Las Vegas, NV markets lending support. All three
projects are expected to contribute beginning in the second
half of the year.
Our Take
In our view, LGI Homes is a strong candidate to be a
breakout performer in the coming years. While we are bull-
ish on homebuilders in general, we believe LGI offers the
most upside given its relatively small size, strong projected
growth rates, and attractive valuation. In regard to the last
mentioned, LGIH stock is currently trading right around
10x forward earnings. If our housing assumptions are cor-
rect, we believe the equity could more than double in price
over the next 3 to 5 years.
That said, investors should be aware of the potential down-
side risks here. Homebuilding is a cyclical and capital-intense
business where the swings can be highly volatile from one
quarter to the next. In LGI’s case, the company currently
carries a relatively high debt-to-capital ratio, with little cash
on the balance sheet to provide support in the event of a
downturn. This shouldn’t be an issue as long as it can main-
tain growth, something it appears highly likely to accomplish
in 2018 and 2019, but more conservative portfolios may be
deterred by the elevated degree of risk the debt presents. At
this juncture, LGIH stock holds below average scores for
Safety (4 out of 5) and Price Stability (15 out of 100), to go
along with an above-market Beta (1.40).
All told, we have set a three- to five-year price target of $130 a
share and recommend the use of a stop/loss at $45 to mitigate
downside risk. The stock trades on the NASDAQ under the
symbol LGIH.
June 2018 The Value Line Special Situations Service 7