LGI Homes (LGIH)
Solvency ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-capital ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Debt-to-equity ratio | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Financial leverage ratio | 1.84 | 1.84 | 1.90 | 1.68 | 1.60 |
Based on the solvency ratios provided for LGI Homes, it is evident that the company maintains a very strong financial position with consistently low debt levels across all years.
1. Debt-to-assets ratio: LGI Homes has maintained a Debt-to-assets ratio of 0.00 for all the years, indicating that the company's total debt is effectively non-existent in relation to its total assets. This implies that the company relies very little on debt to finance its operations or investments.
2. Debt-to-capital ratio: Similarly, the Debt-to-capital ratio remains at 0.00 for all years, signifying that the company's debt is negligible in comparison to its total capital. This suggests that LGI Homes has a strong capital structure with minimal reliance on debt financing.
3. Debt-to-equity ratio: The Debt-to-equity ratio also stands at 0.00 for all the years, indicating that the company's total liabilities are practically non-existent in relation to its equity. This reflects a highly favorable position, showcasing the company's financial stability and sustainable operations.
4. Financial leverage ratio: The Financial leverage ratio shows a slight fluctuation over the years but remains relatively stable, with values ranging from 1.60 to 1.90. This ratio indicates the extent to which the company uses debt to finance its assets. The consistent low values suggest that LGI Homes has a conservative approach to leverage, which is beneficial for long-term financial health.
In conclusion, LGI Homes demonstrates exceptional solvency metrics, with virtually no debt on its balance sheet and a conservative approach to leverage. This strong financial position indicates a low risk of insolvency and portrays the company as well-equipped to weather economic uncertainties and pursue future growth opportunities.
Coverage ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Interest coverage | — | 2.66 | 13.19 | 19.31 | 94.75 |
Interest coverage measures a company's ability to pay interest expenses on its outstanding debt. A higher interest coverage ratio indicates that the company can easily meet its interest obligations. Looking at LGI Homes' interest coverage over the years, we observe a downward trend.
As of December 31, 2020, LGI Homes had a robust interest coverage ratio of 94.75, reflecting strong earnings relative to its interest expenses. However, this ratio declined significantly to 19.31 by December 31, 2021, and continued to decrease to 13.19 by December 31, 2022.
The interest coverage ratio dropped further to 2.66 by December 31, 2023, suggesting a potential strain on the company's ability to cover its interest payments with its earnings. The absence of a specific figure for December 31, 2024, makes it difficult to assess the current situation.
Overall, the declining trend in LGI Homes' interest coverage raises concerns about its ability to handle interest payments from its earnings. Investors and creditors may view a decreasing interest coverage ratio as a red flag, indicating potential financial stress and risk.