LGI Homes (LGIH)

Inventory turnover

		Dec 31, 2024	Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020
Cost of revenue (ttm)	US$ in thousands	1,669,310	1,705,210	1,675,582	1,727,302	1,816,393	1,737,835	1,670,376	1,658,753	1,657,855	1,859,987	2,018,031	2,103,754	2,232,115	2,296,825	2,146,477	1,932,673	1,764,832	1,574,198	1,541,658	1,528,548
Inventory	US$ in thousands	3,387,850	3,439,670	3,360,260	3,229,100	3,107,650	3,056,970	2,889,110	2,880,520	2,898,300	2,871,900	2,633,710	2,335,570	2,085,900	1,908,140	1,750,860	1,609,690	1,569,490	1,548,510	1,458,260	1,481,830
Inventory turnover		0.49	0.50	0.50	0.53	0.58	0.57	0.58	0.58	0.57	0.65	0.77	0.90	1.07	1.20	1.23	1.20	1.12	1.02	1.06	1.03

December 31, 2024 calculation

Inventory turnover = Cost of revenue (ttm) ÷ Inventory
= $1,669,310K ÷ $3,387,850K
= 0.49

LGI Homes' inventory turnover ratio, a measure of how efficiently the company manages its inventory, has displayed fluctuations over the period under review. The inventory turnover ratio indicates how many times the company sells and replaces its inventory within a specific time frame.

From March 31, 2020, to June 30, 2021, LGI Homes saw a consistent increase in its inventory turnover, reaching its peak at 1.23 on June 30, 2021. This suggests that the company was efficiently managing its inventory during this period. However, starting from September 30, 2021, the ratio began to decline steadily, reaching 0.49 on December 31, 2024.

The decreasing trend in the inventory turnover ratio could signify potential issues such as overstocking, slow sales, or ineffective inventory management. A lower inventory turnover ratio could imply higher carrying costs, obsolete inventory, and reduced liquidity.

It is crucial for LGI Homes to analyze the causes behind the declining inventory turnover and take appropriate measures to optimize inventory levels, improve sales, and enhance operational efficiency. Regular monitoring and effective inventory management practices are essential to maintain a healthy inventory turnover ratio and support overall financial performance.