Legacy Housing: An Attractive Buy Ahead Of Quiet Period Expiration
Overview
The quiet period for Legacy Housing (Nasdaq: LEGH) is set to expire on Jan. 8, 2019. The expiration of the quiet period will allow the underwriters of the IPO to release detailed analyses and reports and to make recommendations per SEC rules. The release of the underwriters' reports could cause a temporary price increase, and we recommend that risk-tolerant investors consider buying shares ahead of the IPO quiet period expiration on January 8th.
Business summary
Legacy Housing Corp. manufactures, sells, finances, and distributes tiny homes and manufactured houses through a network of stores throughout the U.S. It is the fourth largest company in the U.S. that produces manufactured homes.
(Source: Company Website)
The homes range in price from $22,000 to $95,000 and in size from 390 square feet to 2,667 square feet. Legacy Housing reports that it sold 3,274 sections in 2017 and 3,045 sections during the first nine months of 2018.
IPO performance
Legacy Housing priced at $12 after setting a price range of $10.75 to $12.75. During its market debut on Dec. 14, the company's stock closed at $12.10. LEGH reached a high of $12.5 briefly on Dec. 17 before falling back to close at $12.20 that day. LEGH has a return from IPO of -.01%.
Management team highlights
Legacy Housing Corporation's predecessor company, Legacy Housing LTD., was founded in 2005 by co-founders and co-chief executive officers Curtis Hodgson and Kenneth Shipley. Co-CEO Hodgson completed his Bachelor of Science in engineering at the University of Michigan and his Juris Doctor at the University of Texas. Hodgson has owned and managed multiple manufactured housing companies over the past 37 years. Co-CEO Shipley co-founded Legacy Housing together with Hodgson in 2005. He has more than 30 years of experience in the manufactured housing industry. He has also owned and operated Bell Homes, a manufactured housing retailer since 1981. Jeffrey Burt is the chief financial officer of Legacy Housing and joined the predecessor company in 2010. Before joining the company, Burt served as the CFO and vice president of Kohner Properties from 1993 to 2009. Burt earned his Bachelor of Science at the University of Illinois and his Master of Business Administration from the University of Notre Dame.
Financial overview
Legacy Housing reports that its product sales during the first nine months of 2018 totaled $110.5 million. By comparison, its product sales during the first nine months of 2017 totaled $73 million. Its total net revenues for the first nine months of 2018 were $127.2 million. The company's net income during the first nine months of 2018 was $18.7 million, which was an increase over the net income of $16.7 million the company had during the first nine months of 2017. The company reported that it intended to use the proceeds of its IPO to expand its retail presence in its operating area by adding 10 to 15 retail locations. It states that each location costs between $1 million and $2 million to open. The company also intends to use a portion of the proceeds to offer financing to some of its customers.
Conclusion
Legacy Housing Corporation has increased its profits over the years and has impressive, experienced management. Our research demonstrates that stocks tend to have a temporary increase in price around the expiration of the quiet period and release of analyst reports. Despite the recent decline in LEGH share price along with the broader market, we still consider LEGH an attractive buy ahead of the stock's quiet period expiration on January 8th.
Disclosure: I am/we are long LEGH.
Disclaimer: I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship ...
more