LGI Homes (LGIH)

Working capital 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
Revenue (ttm)	US$ in thousands	2,502,048	2,553,066	2,518,751	2,561,524	2,358,580	2,238,428	2,167,963	2,245,762	2,304,455	2,617,269	2,821,803	2,890,246	3,050,149	3,146,471	2,929,065	2,619,155	2,367,929	2,076,180	2,025,059	2,005,287
Total current assets	US$ in thousands	3,469,770	3,549,590	3,454,550	3,305,250	3,197,940	3,139,600	2,980,610	2,945,360	2,955,440	2,962,010	2,727,780	2,437,380	2,194,330	2,004,020	1,932,090	1,717,080	1,721,370	1,656,860	1,565,590	1,645,070
Total current liabilities	US$ in thousands	137,926	212,251	272,635	266,026	235,484	341,970	355,130	380,857	365,415	202,395	131,140	109,052	150,781	89,584	120,545	123,556	148,684	78,989	92,582	71,727
Working capital turnover		0.75	0.77	0.79	0.84	0.80	0.80	0.83	0.88	0.89	0.95	1.09	1.24	1.49	1.64	1.62	1.64	1.51	1.32	1.37	1.27

December 31, 2024 calculation

Working capital turnover = Revenue (ttm) ÷ (Total current assets – Total current liabilities)
= $2,502,048K ÷ ($3,469,770K – $137,926K)
= 0.75

The working capital turnover ratio measures how efficiently a company is using its working capital to generate sales. A higher ratio indicates that the company is effectively managing its working capital.

Analyzing the working capital turnover of LGI Homes from March 31, 2020, to December 31, 2024, we observe fluctuations in the ratio. The ratio increased from 1.27 on March 31, 2020, to a peak of 1.64 on March 31, 2021, before declining gradually over subsequent periods.

From the peak in March 2021, the ratio decreased to 0.75 by December 31, 2024, indicating a lower level of efficiency in utilizing working capital to generate sales. This decreasing trend suggests that LGI Homes may be facing challenges in managing its working capital effectively or experiencing slower sales growth relative to its working capital levels.

Overall, the declining working capital turnover ratio for LGI Homes from 2021 to 2024 implies a need for the company to reassess its working capital management strategies to enhance operational efficiency and optimize the utilization of resources for generating revenue.