One thing we could say about the analysts on LGI Homes, Inc. (NASDAQ:LGIH) - they aren't optimistic, having just made a major negative revision to their near-term (statutory) forecasts for the organization. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the downgrade, the current consensus from LGI Homes' six analysts is for revenues of US$2.8b in 2025 which - if met - would reflect a substantial 25% increase on its sales over the past 12 months. Statutory earnings per share are presumed to jump 28% to US$10.74. Prior to this update, the analysts had been forecasting revenues of US$3.1b and earnings per share (EPS) of US$11.79 in 2025. It looks like analyst sentiment has fallen somewhat in this update, with a measurable cut to revenue estimates and a small dip in earnings per share numbers as well.

Analysts made no major changes to their price target of US$118, suggesting the downgrades are not expected to have a long-term impact on LGI Homes' valuation.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that LGI Homes' rate of growth is expected to accelerate meaningfully, with the forecast 19% annualised revenue growth to the end of 2025 noticeably faster than its historical growth of 2.0% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 5.8% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect LGI Homes to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that analysts cut their earnings per share estimates, expecting a clear decline in business conditions. Unfortunately, analysts also downgraded their revenue estimates, although our data indicates revenues are expected to perform better than the wider market. Often, one downgrade can set off a daisy-chain of cuts, especially if an industry is in decline. So we wouldn't be surprised if the market became a lot more cautious on LGI Homes after today.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple LGI Homes analysts - going out to 2026, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies backed by insiders.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.