LGI Homes (LGIH)
Profitability ratios
Return on sales
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Gross profit margin | 24.21% | 22.99% | 28.06% | 26.82% | 25.47% |
| Operating profit margin | 9.63% | 9.89% | 16.93% | 17.96% | 15.40% |
| Pretax margin | 11.75% | 11.10% | 18.14% | 17.80% | 15.53% |
| Net profit margin | 8.90% | 8.45% | 14.17% | 14.09% | 13.68% |
LGI Homes has shown a consistent improvement in its gross profit margin over the years, increasing from 25.47% in 2020 to 24.21% in 2024. This indicates the company's ability to efficiently manage its production costs and generate profits from its operations.
However, the operating profit margin and pretax margin have displayed a different trend. The operating profit margin rose from 15.40% in 2020 to 17.96% in 2021 but then declined to 9.63% in 2024. Similarly, the pretax margin increased from 15.53% in 2020 to 18.14% in 2022 before declining to 11.75% in 2024. These decreases suggest that LGI Homes may be facing challenges in controlling its operating expenses and other costs.
The net profit margin of the company has also shown a downward trend, decreasing from 13.68% in 2020 to 8.90% in 2024. This indicates that after accounting for all expenses and taxes, the company is retaining a lower percentage of its revenue as net profit.
Overall, while LGI Homes has shown improvements in its gross profit margin, the declining trends in operating profit margin, pretax margin, and net profit margin indicate potential concerns regarding the company's operational efficiency and profitability.
Return on investment
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Operating return on assets (Operating ROA) | 5.64% | 6.84% | 12.48% | 23.29% | 19.97% |
| Return on assets (ROA) | 5.22% | 5.85% | 10.45% | 18.27% | 17.74% |
| Return on total capital | 0.00% | 12.57% | 23.75% | 39.24% | 32.02% |
| Return on equity (ROE) | 9.62% | 10.73% | 19.88% | 30.78% | 28.44% |
Based on the provided data for LGI Homes, we can observe the following trends in profitability ratios:
1. Operating return on assets (Operating ROA) has shown a fluctuating pattern over the years, starting at 19.97% in 2020 and reaching its peak at 23.29% in 2021. However, this ratio declined in the subsequent years to 12.48% in 2022, 6.84% in 2023, and further to 5.64% in 2024. This indicates a decrease in the company's ability to generate operating profit from its assets.
2. Return on assets (ROA) also displays a declining trend with a gradual decrease from 17.74% in 2020 to 5.22% in 2024. This ratio shows the overall efficiency in generating profits from the total assets irrespective of the operating expenses.
3. Return on total capital peaked at 39.24% in 2021 but sharply dropped to 0.00% in 2024. This ratio indicates how effectively the company is generating returns from both equity and debt capital.
4. Return on equity (ROE) shows a similar declining trend, starting at 28.44% in 2020 and falling to 9.62% in 2024. ROE reflects the profitability of the company from the perspective of its shareholders' equity.
Overall, the profitability ratios of LGI Homes have witnessed a downward trajectory over the years, indicating potential challenges in asset utilization and generating returns for both shareholders and overall capital invested. Further analysis is required to understand the underlying factors contributing to these trends and to devise appropriate strategies for improving profitability.