LGI Homes, Inc. (NASDAQ: LGIH ) reported financial results for the fourth quarter and full year 2025 on February 17, 2026. Diluted fourth quarter earnings per share of $0.97 missed the consensus estimate of $0.98. Full-year diluted earnings per share came in at $3.34. The company has projected 2026 home closings from 4,600 to 5,400.
Company Description
LGI Homes, Inc. designs, builds and sells entry-level homes in 36 markets in 21 states. The company focuses on first-time buyers through a new, streamlined approach to home building. It operates 144 retail communities and emphasizes quality construction, customer service and affordable prices.
Stock Performance and Valuation
LGI Homes closed at $58.14 on February 17, 2026. This gives the company a market capitalization of approximately $1.34 billion, based on 23.08 million shares outstanding. The stock traded in a 52-week range of $39.70 to $84.94 and fell 4.3% on the day of the earnings release amid margin pressure. It trades at a forward earnings multiple of around 12.8x based on analyst estimates, indicating affordability challenges and expected margin compression.
Quarterly and Annual Results
Fourth quarter home sales revenue fell 15% year-over-year to $474.0 million, with 1,301 home closings at an average sales price of $364,310. Gross margin as a percentage of real estate sales revenue stood at 17.7%, while adjusted gross margin stood at 22.3%. Total revenue reached $17.3 million. Real estate sales revenue for the year totaled $1.7 billion, with 4,685 home closings for an average sales price of $364,035. Gross margin as a percentage of real estate sales revenue stood at 20.7%, while adjusted gross margin reached 24.0%. Total revenue reached $72.6 million. The backlog grew 133% year over year to 1,394 homes valued at $501.3 million.
Earnings Call and Key Themes
Corporate partners include Eric Thomas Lipar, chief executive officer and chairman of the board; Charles Michael Merdian, chief financial officer and treasurer; and Joshua D. Fattor, vice president of investor relations. Management highlighted targeted sales initiatives driving sequential revenue growth and an increase in backlog from a 480-home wholesale deal. Recurring themes focused on the pressure on affordability that creates benefits and discounts, the increase in cancellations to 43.3%, and the direction of funds through the sale of opportunistic properties to reduce debt.
Direction and Outlook
LGI Homes is targeting 2026 home closings of 4,600-5,400, with active sales communities at 150-160. The average sales price for each foreclosed home is expected to be between $355,000 and $365,000. Gross margin as a percentage of real estate sales revenue is estimated at 18.0%-20.0%, with adjusted gross at 21.0%-23.0%. SG&A as a percentage of real estate sales revenue is expected to be 15.0%-16.0%, with an effective tax rate of approximately 26.5%.
Geopolitical and Tariff Risks
Management noted potential impacts from changes in US trade policies, including tariffs and duties on home building products that could increase input costs. Broader risks include economic uncertainty, interest rate volatility and regulatory changes affecting institutional buyers.
SWOT analysis
- Power: Strong backlog growth; hard cash of $334.8 million; focus on affordable entry-level housing; Inventory lot control at 60,842 owned and controlled.
- Weaknesses: Suggested cancellation rate of 43.3%; gross margin compression from incentives and wholesale mix; reliance on first-time buyers facing financial constraints.
- Possibilities: Wholesale closing is 10%-15% of the total; social expansion in 150-160; the need for long-term housing from resource shortages and demographics.
- Threats: Ongoing insolvency pressures; property damage in dysfunctional communities; trade policy changes that increase the cost of goods; competitive discount in the industry.
