Mortgage interest rates hover near longtime lows, there’s a shortage of housing, and consumers have more money as the job market recovers and waves of stimulus roll out. That puts homebuilders like LGI Homes in a sweet spot for growth. On Thursday, LGI Homes (LGIH) hit an important performance benchmark, as its Relative Strength (RS) Rating jumped into the 80-plus percentile with an improvement to 82, up from 79 the day before.
An 82 RS Rating means that Woodlands, Texas-based LGI Homes has outperformed 82% of all stocks, regardless of industry group. It’s a significant jump because research shows the best stocks typically have an RS Rating above 80 as they launch their biggest climbs.
LGI Homes primarily builds entry-level and move-up, single family homes in high growth markets mainly in the West and Southwest.
LGI Homes Shines In These Areas
Among other technical indicators, LGI boasts a near-perfect 98 EPS Rating, out of a best-possible 99. That points to strong profit growth in recent quarters and years. Additionally, its Accumulation/Distribution Rating is B on an A+ to E scale, reflects moderate buying of its stock by institutions.
Also, its Composite Rating is an outstanding 98.
IBD’s Composite Rating combines five separate proprietary ratings of fundamental and technical performance into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Although LGI and other homebuilders are outperforming the market, the Building-Residential and Commercial group they’re in is ranked a weak 122 of IBD’s 197 industry groups after a couple of difficult years for homebuilders. That leaves plenty of room for further growth.
In terms of fundamentals, LGI Homes has posted two quarters of rising earnings growth. Revenue gains have also moved higher during the same period.
In its most recent quarter, LGI recorded a 106% surge in EPS to $5.18. That followed increases of 129%, 21% and 27% the prior three quarters. Revenue last quarter rose 48% to $897.4 million.
LGI Homes is now considered extended and out of buy range after clearing a 125.10 buy point in a first-stage cup with handle. See if the stock forms a new pattern or follow-on buying opportunity like a three-weeks tight or pullback to the 50-day or 10-week line.
When looking for the best stocks to buy and watch, one factor to watch closely is relative price strength.
This unique rating tracks market leadership by showing how a stock’s price action over the last 52 weeks measures up against that of other stocks on the major indexes.
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