Investors might want to bet on LGI Homes (LGIH - Free Report) , as earnings estimates for this company have been showing solid improvement lately. The stock has already gained solid short-term price momentum, and this trend might continue with its still improving earnings outlook.
The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this entry-level homebuilder in the Texas, Arizona, Florida and Georgia markets, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. Our stock rating tool -- the Zacks Rank -- has this insight at its core.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
Consensus earnings estimates for the next quarter and full year have moved considerably higher for LGI Homes, as there has been strong agreement among the covering analysts in raising estimates.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
The earnings estimate of $1.90 per share for the current quarter represents a change of -1.55% from the number reported a year ago.
Over the last 30 days, two estimates have moved higher for LGI Homes compared to no negative revisions. As a result, the Zacks Consensus Estimate has increased 13.81%.
Current-Year Estimate Revisions
For the full year, the company is expected to earn $9.17 per share, representing a year-over-year change of +30.63%.
There has been an encouraging trend in estimate revisions for the current year as well. Over the past month, two estimates have moved up for LGI Homes versus no negative revisions. This has pushed the consensus estimate 22.36% higher.
Favorable Zacks Rank
Thanks to promising estimate revisions, LGI Homes currently carries a Zacks Rank #2 (Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
LGI Homes shares have added 5.4% over the past four weeks, suggesting that investors are betting on its impressive estimate revisions. So, you may consider adding it to your portfolio right away to benefit from its earnings growth prospects.