Contrasting Forestar Group (NYSE:FOR) and LGI Homes (NASDAQ:LGIH)

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

Analyst Recommendations

This is a summary of current ratings and recommmendations for Forestar Group and LGI Homes, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Forestar Group	0	2	3	1	2.83
LGI Homes	2	1	2	0	2.00

Forestar Group presently has a consensus target price of $31.75, indicating a potential upside of 27.80%. LGI Homes has a consensus target price of $74.63, indicating a potential upside of 97.79%. Given LGI Homes’ higher possible upside, analysts plainly believe LGI Homes is more favorable than Forestar Group.

Insider & Institutional Ownership

35.5% of Forestar Group shares are held by institutional investors. Comparatively, 84.9% of LGI Homes shares are held by institutional investors. 0.5% of Forestar Group shares are held by insiders. Comparatively, 12.6% 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 is poised for long-term growth.

Valuation and Earnings

This table compares Forestar Group and LGI Homes”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Forestar Group	$1.66 billion	0.76	$167.90 million	$3.27	7.60
LGI Homes	$1.71 billion	0.51	$72.55 million	$3.13	12.05

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

Volatility and Risk

Forestar Group has a beta of 1.42, indicating that its share price is 42% more volatile than the S&P 500. Comparatively, LGI Homes has a beta of 1.88, indicating that its share price is 88% more volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Forestar Group	9.90%	9.76%	5.39%
LGI Homes	4.25%	4.08%	2.13%

Summary

Forestar Group beats LGI Homes on 9 of the 15 factors compared between the two stocks.

About Forestar Group

Forestar Group Inc. operates as a residential lot development company in the United States. The company acquires land and develops infrastructure for single-family residential communities. It sells its residential single-family finished lots to local, regional, and national homebuilders. The company was incorporated in 2005 and is headquartered in Arlington, Texas. Forestar Group Inc. operates as a subsidiary of D.R. Horton, Inc.

About LGI Homes

LGI Homes, Inc. designs, constructs, and sells homes. It offers entry-level homes, such as attached and detached homes, and active adult homes under the LGI Homes brand name; and luxury series homes under the Terrata Homes brand name. The company also engages in the wholesale business, which include building and selling homes to large institutions looking to acquire single-family rental properties. It serves customers in Texas, Arizona, Florida, Georgia, New Mexico, Colorado, North Carolina, South Carolina, Washington, Tennessee, Minnesota, Oklahoma, Alabama, California, Oregon, Nevada, West Virginia, Virginia, Pennsylvania, Maryland, and Utah. LGI Homes, Inc. was founded in 2003 and is headquartered in The Woodlands, Texas.