AV Homes (AVHI) & LGI Homes (LGIH) Critical Analysis

AV Homes (NASDAQ: AVHI) and LGI Homes (NASDAQ:LGIH) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, earnings, institutional ownership, dividends, valuation and risk.

Institutional and Insider Ownership

86.4% of AV Homes shares are held by institutional investors. Comparatively, 90.0% of LGI Homes shares are held by institutional investors. 7.7% of AV Homes shares are held by insiders. Comparatively, 13.6% of LGI Homes shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Volatility & Risk

AV Homes has a beta of 0.51, indicating that its stock price is 49% less volatile than the S&P 500. Comparatively, LGI Homes has a beta of 0.13, indicating that its stock price is 87% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent recommendations for AV Homes and LGI Homes, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
AV Homes 0 1 0 0 2.00
LGI Homes 0 2 2 0 2.50

LGI Homes has a consensus target price of $61.25, suggesting a potential upside of 0.25%. Given LGI Homes’ stronger consensus rating and higher probable upside, analysts clearly believe LGI Homes is more favorable than AV Homes.

Profitability

This table compares AV Homes and LGI Homes’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
AV Homes -3.18% 1.73% 0.72%
LGI Homes 9.38% 27.68% 12.25%

Earnings and Valuation

This table compares AV Homes and LGI Homes’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
AV Homes $843.25 million 0.48 -$21.93 million $0.74 24.66
LGI Homes $1.26 billion 1.10 $113.30 million $4.73 12.92

LGI Homes has higher revenue and earnings than AV Homes. LGI Homes is trading at a lower price-to-earnings ratio than AV Homes, indicating that it is currently the more affordable of the two stocks.

Summary

LGI Homes beats AV Homes on 12 of the 14 factors compared between the two stocks.

About AV Homes

AV Homes, Inc. engages in the homebuilding and community development businesses in Florida, the Carolinas, Arizona, and Texas markets. The company is involved in the acquisition, development, and building of active adult communities, which are age-restricted to the age 55 and over active adult demographic; and primary residential home communities under local Savvy Homes, Bonterra Builders, Royal Oak Homes, and Oakdale-Hampton brands for first-time and move-up buyers. It also engages in the construction and sale of residences within the communities. In addition, the company is involved in other real estate activities, such as the operation of amenities; and the sale of land for third-party development. As of December 31, 2017, it owned 4,911 developed residential lots; 2,395 partially developed residential lots; 8,776 undeveloped residential lots; and 6,980 acres of mixed-use, commercial, and industrial land. The company was formerly known as Avatar Holdings Inc. and changed its name to AV Homes, Inc. in February 2012. AV Homes, Inc. was founded in 1970 and is headquartered in Scottsdale, Arizona.

About LGI Homes

LGI Homes, Inc. engages in the design, construction, and sale of new homes in Texas, Arizona, Florida, Georgia, New Mexico, South Carolina, North Carolina, Colorado, Washington, Tennessee, and Minnesota markets. It offers entry-level homes, such as detached and townhomes, as well as move-up homes under the LGI Homes brand name; and luxury series homes under the Terrata Homes brand name. As of December 31, 2017, it owned 72 communities under the LGI Homes brand; and 6 under the Terrata Homes brand. LGI Homes, Inc. was founded in 2003 and is headquartered in The Woodlands, Texas.

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