LEGH

We rate Legacy Housing Corp (LEGH) as Avoid with a composite score of 38.4/100 at a current price of $21.78. The stock falls in the bottom quintile of our universe across key quantitative factors, and the multi-factor weakness suggests a high probability of continued underperformance.

The rating is primarily driven by strength in stability (79th percentile) and value (43th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (23th percentile) and quality (31th percentile) tempers our overall conviction. We assign a No Moat rating (39/100), Low uncertainty, and Standard capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Legacy Housing Corp holds a top-quartile position (#0 of 50) within the Construction sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 38.4/100 places it at rank #3736 in our full 7,333-stock universe. At $657M in market capitalization, Legacy Housing Corp is a small-cap player in the Construction space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -5% combined with momentum at the 23th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 49% (+25.1pp vs sector) narrow to operating margins of 31% (+23.8pp vs sector) and net margins of 28.8%, yielding a gross-to-net conversion rate of 59%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $21.78, Legacy Housing Corp is trading near fair value based on current fundamentals. Our value factor score of 43/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 10.6x (a 45% discount to the sector median of 19.1x), EV/EBITDA of 9.8x (near the sector median), P/B of 1.0x, P/S of 3.1x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Low uncertainty rating to Legacy Housing Corp. The company exhibits strong financial stability with a beta of 0.44, conservative leverage (7% D/E), and a stability factor in the 79th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: weak quality scores (31th percentile); low beta of 0.44 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 79th percentile and quality factor at the 31th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 49% provide a buffer against cost pressures; conservative leverage (7% D/E) limits balance sheet risk; above-average stability (79th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Legacy Housing Corp's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 9.5%, and the balance sheet is managed within acceptable parameters (D/E: 7%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; Legacy Housing Corp falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, Legacy Housing Corp receives a Avoid rating with a composite score of 38.4/100 (rank #3736 of 7,333). Our quantitative framework assigns a No Moat (39/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 44/100.

Our analysis does not support a constructive view on Legacy Housing Corp at this time. The combination of limited competitive advantages, low uncertainty, and standard capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.