LGI (ASX:LGI) Shares Confront Cash Conversion Doubts After Strong Margins

LGI walked into this result priced for perfection, trading on a P/E of 28.7x and sitting at A$2.43 after a flat month and a sharp 90 day slide. The stock has been treated as a high growth clean energy story. The headline from FY26 is simple. Profit is strong on paper, with net income of A$5.689m in the second half and a 20.1% margin over the past year, but the quality of those earnings and the pressure from a stretched valuation now sit front and centre.

Is LGI fairly priced as a high growth clean energy stock, or is the A$2.43 share price running ahead of its 28.7x P/E and cash quality story? Compare the headline multiples with the underlying cash flows in our valuation analysis for LGI

FY 2026 Earnings Summary

• Revenue (FY26 H2 vs FY25 H2): A$23.307 million vs. A$19.864 million (higher period on period)
• Net Income (Excl. Extra Items, FY26 H2 vs FY25 H2): A$5.689 million vs. A$4.074 million (higher period on period)
• Basic EPS (FY26 H2 vs FY25 H2): A$0.05486 per share vs. A$0.045974 per share (higher period on period)
• Net Profit Margin (Last 12 Months vs Prior Year): 20.1% vs. 17.6% (margin higher year on year)

Prefer clear charts instead of another dense block of earnings tables and metrics? See LGI's full financial picture, including how its recent profit performance ties into valuation and cash quality, in our visual company report for LGI.

LGI results still align with ESG‑infrastructure pitch

The latest LGI numbers broadly back the idea of an ESG aligned, infrastructure style business. Revenue, EBITDA and NPAT each moved higher, and the EBITDA margin reached 55%, which supports the view that landfill gas and carbon projects can throw off healthy economics when run efficiently. Operational delivery looks solid, with biogas recovery, MWh generated and ACCU volumes all higher and a broader base of 37 operating sites. A fully franked dividend and zero net debt after the equity raise reinforce the impression of a business with real operating and financial substance.

Execution, cash conversion and project timing temper enthusiasm

The bear case for LGI finds some support in softer cash conversion and project execution risk. Profit grew faster than cash, which keeps attention on how reliably earnings convert as ACCU and certificate inventories move to revenue. Delays at Mugga Lane and connection constraints for batteries show how reliant the roll out is on third party approvals. Recent electricity price softness also explains management’s focus on hedging and ACCU levers. This is a reminder that power markets and policy exposed revenue streams can become a headwind if conditions weaken further.

After dilution over the past year, softer cash conversion and project delays, it is reasonable to ask whether these are isolated issues or hints of deeper structural fragility in LGI. Review the independent risk analysis for LGI which shows 2 important warning signs

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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