LGI Homes (LGIH)

Return on total capital

		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
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	166,903	226,745	229,546	228,645	235,963	218,324	230,625	323,863	397,362	498,223	541,584	526,559	550,285	574,379	514,256	436,846	368,459	286,365	273,246	264,046
Long-term debt	US$ in thousands	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Total stockholders’ equity	US$ in thousands	2,037,230	1,996,960	1,923,840	1,869,200	1,856,030	1,802,680	1,731,010	1,674,230	1,642,410	1,606,980	1,513,920	1,422,750	1,395,850	1,335,770	1,286,410	1,218,640	1,139,000	1,012,670	918,782	859,605
Return on total capital		8.19%	11.35%	11.93%	12.23%	12.71%	12.11%	13.32%	19.34%	24.19%	31.00%	35.77%	37.01%	39.42%	43.00%	39.98%	35.85%	32.35%	28.28%	29.74%	30.72%

December 31, 2024 calculation

Return on total capital = EBIT (ttm) ÷ (Long-term debt + Total stockholders’ equity)
= $166,903K ÷ ($—K + $2,037,230K)
= 8.19%

The Return on Total Capital of LGI Homes has exhibited fluctuations over the years, showing a general declining trend from March 31, 2020, to December 31, 2024. The ratio stood at 30.72% on March 31, 2020, and peaked at 43.00% on September 30, 2021. Thereafter, the return on total capital gradually decreased to 8.19% on December 31, 2024.

The high values in the initial period indicate that LGI Homes was effectively generating returns on the total capital invested in the business. However, the declining trend in the later period may suggest challenges in maintaining profitability or efficiently utilizing capital resources. It is crucial for the company to analyze and address the factors contributing to the decreasing trend to ensure sustainable growth and profitability in the future.