The Motley Fool raises a question about LGI Homes guidance during its recent earnings call: Did it jump the gun?
Home builder LGI Homes (NASDAQ:LGIH) produced yet another quarter of growth that outpaced its peers and allowed management to raise its full-year guidance. By any measure, it was a good quarter, but it was the first time in a while that LGI's results showed signs that home sales were starting to slow down.
Did LGI's optimistic guidance numbers come a little too soon in the face of a potential market slowdown? Let's take a look at the company's most recent results and whether there are signs of concern on the horizon.
It's hard to find fault with LGI Homes' most recent result as the company reported a 48% increase in net income compared to this time last year. It was able to achieve that gain because of a 29% increase in revenue while maintaining a high gross margin -- 26.1%, one of the best in the industry -- and keeping its sales, general, and administrative costs to an incredibly low 4.3% of revenue. Most other homebuilders report SG&A expenses in the 9% to 11% range of revenue, so keeping its costs that low is truly a remarkable feat.