LGI Homes (NASDAQ:LGIH) & Leggett & Platt (NYSE:LEG) Critical Analysis

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

Profitability

This table compares LGI Homes and Leggett & Platt’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
LGI Homes	3.88%	3.55%	1.88%
Leggett & Platt	5.64%	13.31%	3.86%

Analyst Recommendations

This is a summary of recent recommendations for LGI Homes and Leggett & Platt, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
LGI Homes	2	2	2	0	2.00
Leggett & Platt	0	4	0	1	2.40

LGI Homes currently has a consensus price target of $72.75, indicating a potential upside of 39.34%. Leggett & Platt has a consensus price target of $10.67, indicating a potential upside of 15.94%. Given LGI Homes’ higher probable upside, equities analysts clearly believe LGI Homes is more favorable than Leggett & Platt.

Insider and Institutional Ownership

84.9% of LGI Homes shares are owned by institutional investors. Comparatively, 64.2% of Leggett & Platt shares are owned by institutional investors. 12.6% of LGI Homes shares are owned by company insiders. Comparatively, 2.4% of Leggett & Platt shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares LGI Homes and Leggett & Platt”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
LGI Homes	$1.71 billion	0.71	$72.55 million	$2.85	18.32
Leggett & Platt	$3.89 billion	0.32	$235.40 million	$1.56	5.90

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

Risk & Volatility

LGI Homes has a beta of 1.84, meaning that its stock price is 84% more volatile than the S&P 500. Comparatively, Leggett & Platt has a beta of 0.73, meaning that its stock price is 27% less volatile than the S&P 500.

Summary

LGI Homes beats Leggett & Platt on 8 of the 15 factors compared between the two stocks.

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.

About Leggett & Platt

Leggett & Platt, Inc. engages in the manufacture and distribution of furniture and engineered components and products among homes, offices, automobiles, and commercial aircraft. It operates through the following segments: Bedding Products, Specialized Products, and Furniture, Flooring & Textile Products. The Bedding Products segment supplies products and components for the home, including mattress springs and specialty foam, as well as adjustable beds, bedding machinery, steel rod, and drawn wire. The Specialized Products segment supplies titanium, nickel, and stainless-steel tubing for the aerospace industry, and serves the construction market with its hydraulic cylinders group. The Flooring, Furniture & Textile Products segment produces an extensive line of components and engineered systems for office, residential, and contract furniture manufacturers. The company was founded by J. P. Products and C. B. Platt in 1883 and is headquartered in Carthage, MO.