LGI Homes (LGIH)

Short-term

Turnover ratios

LGI Homes Inc's activity ratios provide insights into how effectively the company is managing its inventory, receivables, payables, and working capital.

1. Inventory turnover:
- The inventory turnover ratio has been declining over the years, from 1.12 in 2020 to 0.58 in 2023. This suggests that LGI Homes Inc is selling its inventory at a slower pace compared to previous years. A lower inventory turnover can indicate issues such as overstocking or declining demand for the company's products.

2. Receivables turnover:
- The receivables turnover ratio fluctuates greatly, ranging from 20.42 in 2020 to 91.65 in 2022. In 2023, it decreased to 57.08. A higher receivables turnover ratio indicates that the company is efficient in collecting payments from its customers. The fluctuation could be due to changes in credit policies or the company's customer base.

3. Payables turnover:
- The payables turnover ratio shows a decreasing trend over the years, from 129.05 in 2020 to 57.45 in 2023. This indicates that the company is taking more time to pay its suppliers. A lower payables turnover may suggest liquidity issues or strained relationships with suppliers.

4. Working capital turnover:
- The working capital turnover ratio has been relatively stable, staying between 0.81 and 1.49 over the past five years. This ratio measures how efficiently the company is using its working capital to generate sales. The consistent performance in this ratio suggests that LGI Homes Inc is effectively utilizing its working capital to support its operations and growth.

Overall, LGI Homes Inc should pay attention to the declining inventory turnover and payables turnover ratios, as they may indicate potential inefficiencies or challenges in managing its assets and liabilities effectively. It's essential for the company to monitor and address these trends to improve its overall operational efficiency and financial performance.

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Average number of days

Days of Inventory on Hand (DOH) measures how many days a company takes to sell its average inventory. A higher DOH indicates slower inventory turnover. Over the past five years, LGI Homes Inc's DOH has been fluctuating, with a notable increase in 2022 and 2023 compared to previous years. This suggests that the company may be holding onto its inventory for longer periods, which could tie up working capital and potentially indicate inefficiencies in inventory management.

Days of Sales Outstanding (DSO) gauges the average number of days it takes a company to collect revenue after a sale is made. A lower DSO is generally preferable as it indicates a faster collection process. LGI Homes Inc's DSO has been quite volatile over the years, hitting its lowest in 2022 and then increasing in 2023. This could imply improvements in the company's credit and collection processes in 2022 and potential challenges in 2023.

Number of Days of Payables measures how long a company takes to pay its suppliers. A longer payment period can be advantageous as it allows a company to hold onto cash for longer. LGI Homes Inc's number of days of payables has shown some variability but has been relatively consistent across the years. The company seems to have maintained a stable payment cycle without significant deviations.

Overall, LGI Homes Inc's activity ratios suggest mixed trends in inventory management, collection efficiency, and payment practices over the past five years. Further analysis and comparison with industry benchmarks would be necessary to assess the company's operational efficiency in these areas.

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Long-term

LGI Homes Inc's long-term activity ratios provide insights into the company's efficiency in utilizing its assets to generate sales. The fixed asset turnover ratio has shown a declining trend over the past five years, indicating that the company's ability to generate revenues through its fixed assets has decreased. This may suggest inefficiencies in utilizing its property, plant, and equipment to drive sales.

On the other hand, the total asset turnover ratio has been relatively stable over the same period, hovering around 1. This ratio measures the company's overall efficiency in using all its assets to generate sales. LGI Homes Inc has maintained a consistent level of asset turnover, signifying a steady performance in generating sales relative to its total asset base.

Overall, while the fixed asset turnover ratio suggests a decline in efficiency in utilizing fixed assets to generate sales, the consistent total asset turnover ratio indicates a stable performance in utilizing all assets to drive revenue for LGI Homes Inc.