With its stock down 28% over the past three months, it is easy to disregard Legacy Housing (NASDAQ:LEGH). However, the company’s fundamentals look pretty decent, and long-term financials are usually aligned with future market price movements. Specifically, we decided to study Legacy Housing’s ROE in this article.
Return on equity or ROE is an important factor to be considered by a shareholder because it tells them how effectively their capital is being reinvested. Simply put, it is used to assess the profitability of a company in relation to its equity capital.
ROE can be calculated by using the formula:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity
So, based on the above formula, the ROE for Legacy Housing is:
9.2% = US$48m ÷ US$522m (Based on the trailing twelve months to September 2025).
The ‘return’ is the yearly profit. So, this means that for every $1 of its shareholder’s investments, the company generates a profit of $0.09.
See our latest analysis for Legacy Housing
We have already established that ROE serves as an efficient profit-generating gauge for a company’s future earnings. We now need to evaluate how much profit the company reinvests or “retains” for future growth which then gives us an idea about the growth potential of the company. Assuming all else is equal, companies that have both a higher return on equity and higher profit retention are usually the ones that have a higher growth rate when compared to companies that don’t have the same features.
When you first look at it, Legacy Housing’s ROE doesn’t look that attractive. Next, when compared to the average industry ROE of 14%, the company’s ROE leaves us feeling even less enthusiastic. Although, we can see that Legacy Housing saw a modest net income growth of 5.9% over the past five years. So, there might be other aspects that are positively influencing the company’s earnings growth. For instance, the company has a low payout ratio or is being managed efficiently.
As a next step, we compared Legacy Housing’s net income growth with the industry and found that the company has a similar growth figure when compared with the industry average growth rate of 5.6% in the same period.
The basis for attaching value to a company is, to a great extent, tied to its earnings growth. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. Doing so will help them establish if the stock’s future looks promising or ominous. Is LEGH fairly valued? This infographic on the company’s intrinsic value has everything you need to know.