UPDATE: JPMorgan Downgrades LGI Homes (LGIH) to Underweight

(updating comment)

JPMorgan analyst Michael Rehaut downgraded LGI Homes (NASDAQ: LGIH) from Neutral to Underweight with a price target of $129.00.

The analyst comments "We downgrade LGIH to Underweight from Neutral, as we view its relative valuation as somewhat expensive when compared against our fundamental outlook for the company. Specifically, LGIH trades at 9.5x our 2021E EPS and 2.8x on a P/B basis, which compares to DHI and PHM at 8.7x and 6.9x, respectively, against our 2021E EPS and 2.3x and 2.0x on a P/B basis, despite our outlook for LGIH to have nearly the exactly same ROE in 2021, at 24.0% vs. our 24.1% and 24.0% estimates for DHI and PHM. Moreover, we estimate modestly lower operating margins in 2021 for LGIH, at 14.4% vs. 14.9% for DHI and 15.1% for PHM, while lastly, we expect LGIH to continue to grow closings at a more moderate rate over the next several years than in the past, as we note that its 41% average growth from 2013-17 is on track to decelerate to a 15% average from 2018 to 2020E, while looking forward, we estimate closings growth of 10% and 12% in 2021 and 2022, respectively, which is roughly in-line with our universe average outlook for order growth of 12% and 10% (we use closings as a proxy for orders for LGIH given its 100% spec model and shorter build cycle)."

For an analyst ratings summary and ratings history on LGI Homes click here. For more ratings news on LGI Homes click here.

Shares of LGI Homes closed at $109.33 yesterday.

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