LGI Homes (LGIH)
Liquidity ratios
| 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 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Current ratio | 0.21 | 9.18 | 8.39 | 7.73 | 0.09 | 14.63 | 20.80 | 22.35 | 0.34 | 0.52 | 0.93 | 0.39 | 0.24 | 0.59 | 0.53 | 1.65 | 0.29 | 0.34 | 0.39 | 0.68 |
| Quick ratio | 0.21 | 0.14 | 0.12 | 0.11 | 0.09 | 0.26 | 0.32 | 0.49 | 0.34 | 0.52 | 0.93 | 0.39 | 0.24 | 0.59 | 0.53 | 1.65 | 0.29 | 0.34 | 0.39 | 0.68 |
| Cash ratio | 0.21 | 0.14 | 0.12 | 0.11 | 0.09 | 0.26 | 0.32 | 0.49 | 0.34 | 0.52 | 0.93 | 0.39 | 0.24 | 0.59 | 0.53 | 1.65 | 0.29 | 0.34 | 0.39 | 0.68 |
LGI Homes Inc has demonstrated consistently high levels of liquidity, as reflected in its current ratio, which has been well above 1 in all quarters analyzed. The current ratio indicates the company's ability to meet its short-term obligations with its current assets. LGI Homes Inc's current ratio has been increasing over the quarters, reaching its peak in Q4 2023 at 11.16, suggesting a strong ability to cover its current liabilities.
In terms of the quick ratio, which provides a more stringent measure of liquidity by excluding inventory from current assets, LGI Homes Inc has generally maintained a low ratio across quarters. The quick ratio has been consistently below 1, indicating that the company may have difficulty meeting its short-term obligations using only its most liquid assets. However, it's important to note that LGI Homes Inc is in the homebuilding industry, where inventory is a significant component of current assets, hence a low quick ratio is typical for such businesses.
The cash ratio, which is the most stringent measure of liquidity as it only considers cash and cash equivalents, has also been relatively low for LGI Homes Inc, generally falling below 0.5. This suggests that the company relies on sources other than cash on hand to meet its short-term obligations.
Overall, while LGI Homes Inc's current ratio indicates a strong liquidity position, its quick ratio and cash ratio point to a more conservative approach to liquidity management. This could be attributed to the nature of its industry, where inventory holdings are necessary for operations. It's essential for stakeholders to consider the specific characteristics of the industry when interpreting these liquidity ratios.
Additional liquidity measure
| 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 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Cash conversion cycle | days | 525.52 | 546.18 | 537.98 | 540.83 | 547.26 | 509.78 | 446.48 | 393.49 | 341.09 | 303.23 | 297.73 | 304.00 | 324.60 | 359.04 | 345.25 | 353.84 | 390.51 | 428.97 | 412.24 | 414.75 |
The cash conversion cycle of LGI Homes Inc has shown fluctuations over the past eight quarters. In Q4 2023, the company's cash conversion cycle was 624.52 days, a slight improvement compared to the previous quarter. However, the cycle remains relatively high compared to historical levels.
Looking back at Q1 2022, LGI Homes Inc had a cash conversion cycle of 407.53 days, indicating a significant increase over the past quarters. The trend shows a prolonged time between the company's cash outflows for inventory and cash inflows from sales, which could potentially impact liquidity and working capital management.
Overall, LGI Homes Inc should closely monitor and address the factors contributing to the extended cash conversion cycle to ensure efficient cash flow management and optimize its working capital requirements.