An Intrinsic Calculation For LGI Homes, Inc. (NASDAQ:LGIH) Suggests It's 44% Undervalued
An Intrinsic Calculation For LGI Homes, Inc. (NASDAQ:LGIH) Suggests It's 44% Undervalued
Key Insights
- The projected fair value for LGI Homes is US$170 based on 2 Stage Free Cash Flow to Equity
- Current share price of US$95.87 suggests LGI Homes is potentially 44% undervalued
- The US$116 analyst price target for LGIH is 32% less than our estimate of fair value
How far off is LGI Homes, Inc. (NASDAQ:LGIH) from its intrinsic value? Using the most recent financial data, we'll take a look at whether the stock is fairly priced by taking the expected future cash flows and discounting them to today's value. Our analysis will employ the Discounted Cash Flow (DCF) model. Believe it or not, it's not too difficult to follow, as you'll see from our example!
Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. Anyone interested in learning a bit more about intrinsic value should have a read of the Simply Wall St analysis model.
The Model
We use what is known as a 2-stage model, which simply means we have two different periods of growth rates for the company's cash flows. Generally the first stage is higher growth, and the second stage is a lower growth phase. To start off with, we need to estimate the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
A DCF is all about the idea that a dollar in the future is less valuable than a dollar today, so we discount the value of these future cash flows to their estimated value in today's dollars:
10-year free cash flow (FCF) estimate
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF ($, Millions) | -US$111.0m | -US$105.5m | US$147.0m | US$208.6m | US$271.2m | US$330.1m | US$382.5m | US$427.6m | US$465.9m | US$498.3m |
Growth Rate Estimate Source | Analyst x2 | Analyst x2 | Analyst x1 | Est @ 41.91% | Est @ 30.02% | Est @ 21.70% | Est @ 15.88% | Est @ 11.80% | Est @ 8.95% | Est @ 6.95% |
Present Value ($, Millions) Discounted @ 9.6% | -US$101 | -US$87.8 | US$112 | US$144 | US$171 | US$190 | US$201 | US$205 | US$204 | US$199 |
("Est" = FCF growth rate estimated by Simply Wall St)
Present Value of 10-year Cash Flow (PVCF) = US$1.2b
We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (2.3%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 9.6%.
Terminal Value (TV)= FCF2033 × (1 + g) ÷ (r – g) = US$498m× (1 + 2.3%) ÷ (9.6%– 2.3%) = US$7.0b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= US$7.0b÷ ( 1 + 9.6%)10= US$2.8b
The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is US$4.0b. The last step is to then divide the equity value by the number of shares outstanding. Relative to the current share price of US$95.9, the company appears quite good value at a 44% discount to where the stock price trades currently. Valuations are imprecise instruments though, rather like a telescope - move a few degrees and end up in a different galaxy. Do keep this in mind.
The Assumptions
Now the most important inputs to a discounted cash flow are the discount rate, and of course, the actual cash flows. If you don't agree with these result, have a go at the calculation yourself and play with the assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at LGI Homes as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 9.6%, which is based on a levered beta of 1.593. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.
SWOT Analysis for LGI Homes
- Debt is well covered by earnings.
- Balance sheet summary for LGIH.
- Earnings declined over the past year.
- Annual earnings are forecast to grow faster than the American market.
- Good value based on P/E ratio and estimated fair value.
- Debt is not well covered by operating cash flow.
- Revenue is forecast to grow slower than 20% per year.
- Is LGIH well equipped to handle threats?
Looking Ahead:
Valuation is only one side of the coin in terms of building your investment thesis, and it shouldn't be the only metric you look at when researching a company. The DCF model is not a perfect stock valuation tool. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For instance, if the terminal value growth rate is adjusted slightly, it can dramatically alter the overall result. Why is the intrinsic value higher than the current share price? For LGI Homes, we've put together three pertinent items you should assess:
- Risks: As an example, we've found 3 warning signs for LGI Homes (1 is potentially serious!) that you need to consider before investing here.
- Management:Have insiders been ramping up their shares to take advantage of the market's sentiment for LGIH's future outlook? Check out our management and board analysis with insights on CEO compensation and governance factors.
- Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!
PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the NASDAQGS every day. If you want to find the calculation for other stocks just search here.
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.
關鍵見解
- 根據兩階段股權自由現金流,LGI Homes的預計公允價值爲170美元
- 目前的95.87美元股價表明LGI Homes可能被低估了44%
- 分析師對LGIH的116美元目標股價比我們對公允價值的估計低32%
LGI Homes, Inc.(納斯達克股票代碼:LGIH)距離其內在價值有多遠?使用最新的財務數據,我們將通過採用預期的未來現金流並將其折現爲今天的價值,來研究股票的定價是否合理。我們的分析將採用貼現現金流(DCF)模型。信不信由你,這並不難理解,正如你將從我們的例子中看到的那樣!
但請記住,估算公司價值的方法有很多,而差價合約只是一種方法。任何有興趣進一步了解內在價值的人都應該讀一讀 Simply Wall St 分析模型。
該模型
我們使用所謂的兩階段模型,這僅意味着公司的現金流有兩個不同的增長期。通常,第一階段是較高的增長階段,第二階段是較低的增長階段。首先,我們需要估計未來十年的現金流。在可能的情況下,我們會使用分析師的估計值,但是當這些估計值不可用時,我們會從最新的估計值或報告的價值中推斷出之前的自由現金流(FCF)。我們假設自由現金流萎縮的公司將減緩其萎縮速度,而自由現金流不斷增長的公司在此期間的增長率將放緩。我們這樣做是爲了反映早期增長的放緩幅度往往比後來的幾年更大。
差價合約就是關於未來一美元的價值低於今天一美元的概念,因此我們將這些未來現金流的價值折現爲以今天的美元計算的估計價值:
10 年自由現金流 (FCF) 估計
2024 | 2025 | 2026 | 2027 | 2028 | 2029 | 2030 | 2031 | 2032 | 2033 | |
Levered FCF(美元,百萬) | -1.110 億美元 | -1.055億美元 | 147.0 億美元 | 2.086 億美元 | 2.712 億美元 | 3.301 億美元 | 3.825 億美元 | 427.6 億美元 | 4.659 億美元 | 498.3 億美元 |
增長率估算來源 | 分析師 x2 | 分析師 x2 | 分析師 x1 | 美國東部標準時間 @ 41.91% | 美國東部標準時間 @ 30.02% | 美國東部時間 @ 21.70% | 美國東部標準時間 @ 15.88% | 美國東部時間 @ 11.80% | Est @ 8.95% | Est @ 6.95% |
現值(美元,百萬)折扣 @ 9.6% | -101 美元 | -87.8 美元 | 112 美元 | 144 美元 | 171 美元 | 190 美元 | 201 美元 | 205 美元 | 204 美元 | 199 美元 |
(“Est” = Simply Wall St估計的FCF增長率)
十年期現金流(PVCF)的現值 = 12億美元
我們現在需要計算終值,該終值涵蓋了這十年之後的所有未來現金流量。出於多種原因,使用的增長率非常保守,不能超過一個國家的GDP增長率。在這種情況下,我們使用10年期國債收益率的5年平均值(2.3%)來估計未來的增長。與10年 “增長” 期一樣,我們使用9.6%的股本成本將未來的現金流折現爲今天的價值。
終端價值 (TV) = FCF2033 × (1 + g) ÷ (r — g) = 4.98億美元× (1 + 2.3%) ÷ (9.6% — 2.3%) = 70億美元
終端價值的現值 (PVTV) = 電視/ (1 + r)10= 70億美元÷ (1 + 9.6%)10= 28億美元
因此,總價值或權益價值是未來現金流現值的總和,在本例中爲40億美元。最後一步是將股票價值除以已發行股票的數量。相對於目前的95.9美元的股價,該公司看起來物有所值,與目前的股價相比折扣了44%。但是,估值是不精確的工具,就像望遠鏡一樣——移動幾度,最終進入另一個星系。請記住這一點。
假設
現在,貼現現金流的最重要輸入是貼現率,當然還有實際現金流。如果你不同意這些結果,那就自己計算一下,試一試假設。DCF也沒有考慮一個行業可能的週期性,也沒有考慮公司未來的資本需求,因此它沒有全面反映公司的潛在表現。鑑於我們將LGI Homes視爲潛在股東,因此使用權益成本作爲貼現率,而不是構成債務的資本成本(或加權平均資本成本,WACC)。在此計算中,我們使用了9.6%,這是基於1.593的槓桿測試版。Beta是衡量股票與整個市場相比波動性的指標。我們的測試版來自全球可比公司的行業平均貝塔值,設定在0.8到2.0之間,這是一個穩定的業務的合理範圍。
LGI 房屋的 SWOT 分析
- 債務可以很好地由收益支付。
- LGIH 的資產負債表摘要。
- 在過去的一年中,收益有所下降。
- 預計年收入的增長速度將快於美國市場。
- 根據市盈率和估計的公允價值,物有所值。
- 運營現金流無法很好地覆蓋債務。
- 預計收入每年增長將低於20%。
- LGIH 有足夠的能力應對威脅嗎?
展望未來:
就建立投資論點而言,估值只是硬幣的一面,它不應該是你在研究公司時唯一考慮的指標。DCF模型不是完美的股票估值工具。最好你運用不同的案例和假設,看看它們將如何影響公司的估值。例如,如果稍微調整終值增長率,則可能會極大地改變整體結果。爲什麼內在價值高於當前股價?對於LGI Homes,我們彙總了您應該評估的三個相關項目:
- 風險:舉個例子,我們發現了 LGI Homes 的 3 個警告信號(1 個可能很嚴重!)在這裏投資之前,您需要考慮這一點。
- 管理層:內部人士是否一直在增加股價以利用市場對LGIH未來前景的情緒?查看我們的管理層和董事會分析,了解首席執行官薪酬和治理因素。
- 其他穩健的業務:低債務、高股本回報率和良好的過去表現是強大業務的基礎。爲什麼不瀏覽我們具有堅實業務基礎的股票互動清單,看看是否還有其他你可能沒有考慮過的公司!
PS。Simply Wall St應用程序每天對納斯達克證券交易所的每隻股票進行折扣現金流估值。如果您想找到其他股票的計算方法,請在此處搜索。
對這篇文章有反饋嗎?對內容感到擔憂?直接聯繫我們。 或者,給編輯團隊 (at) simplywallst.com 發送電子郵件。
Simply Wall St的這篇文章本質上是籠統的。我們僅使用公正的方法根據歷史數據和分析師的預測提供評論,我們的文章無意作爲財務建議。它不構成買入或賣出任何股票的建議,也沒有考慮到您的目標或財務狀況。我們的目標是爲您提供由基本數據驅動的長期重點分析。請注意,我們的分析可能不考慮最新的價格敏感型公司公告或定性材料。簡而言之,華爾街沒有持有任何上述股票的頭寸。
譯文內容由第三人軟體翻譯。
風險及免責聲明
- 分享到weixin
- 分享到qq
- 分享到facebook
- 分享到twitter
- 分享到微博
- 粘贴板
使用瀏覽器的分享功能,分享給你的好友吧