LGI Homes (LGIH)

Return on total capital

		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
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	261,754	240,059	259,311	350,914	418,116	514,647	532,940	519,049	542,775	565,939	516,760	436,236	367,849	286,172	273,089	265,027	231,832	203,170	187,429	189,565
Long-term debt	US$ in thousands	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—	—
Total stockholders’ equity	US$ in thousands	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	845,193	777,047	725,235	676,926
Return on total capital		14.10%	13.32%	14.98%	20.96%	25.46%	32.03%	35.20%	36.48%	38.88%	42.37%	40.17%	35.80%	32.30%	28.26%	29.72%	30.83%	27.43%	26.15%	25.84%	28.00%

December 31, 2023 calculation

Return on total capital = EBIT (ttm) ÷ (Long-term debt + Total stockholders’ equity)
= $261,754K ÷ ($—K + $1,856,030K)
= 14.10%

LGI Homes Inc's return on total capital has shown a declining trend over the past eight quarters. In Q4 2023, the return on total capital was at 7.27%, down from 6.88% in Q3 2023. This downward trend continued from the peak of 21.47% in Q1 2022. The decreasing trend in return on total capital may indicate inefficiencies in the utilization of capital and lower profitability relative to the invested capital. It is essential for the company to closely monitor and address the factors contributing to this decline to improve overall financial performance and sustainable growth in the long term.