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Meritage Homes Corp (MTH)
NYSE:MTH
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Meritage
(NYSE:MTH)
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Rating:60Neutral
Price Target:
$82.00
▲(5.36% Upside)
Action:DowngradedDate:01/31/26
The score is driven primarily by weakening fundamentals and cash flow volatility, which outweigh the otherwise solid balance sheet. Valuation (low P/E and dividend) provides support, but technical signals and cautious guidance reflect ongoing near-term demand and margin pressure.
Positive Factors
Balance sheet strength & liquidity
Meritage’s balance sheet shows manageable leverage and substantial liquidity (cash $775M, net debt-to-cap ~16.9%), providing durable financial flexibility. This supports planned buybacks, up to $2B land spend, and reduces near-term refinancing risk, preserving strategic optionality over months.
Faster build cycles & backlog conversion
Sustained improvement in cycle times and a 221% backlog conversion rate materially boosts operational throughput and cash conversion. Faster deliveries reduce interest and working-capital exposure, enabling stable revenue realization and a structural advantage in managing quarter-to-quarter closings.
Community footprint expansion
A growing community base (15% YoY) increases geographic diversification and scale, enabling more consistent absorption across markets. Expansion supports future closings, spreads fixed overhead, and enhances land-development optionality—structural tailwinds for multi-quarter revenue and margin recovery if demand normalizes.
Negative Factors
Margin compression & profitability decline
Material margin erosion and a sharp net income decline indicate sustained pricing and cost pressures rather than a one-off blip. Lower gross and net margins constrain free cash generation and capital allocation, making it harder to sustain buybacks, dividends, and land investment unless margins structurally recover.
Weak, volatile cash generation
Low and volatile operating cashflow with poor cash-to-earnings conversion raises structural funding risk. If cash conversion remains depressed, the company’s ability to fund land development, sustained buybacks, or absorb further margin stress will be limited, reducing financial resilience over the medium term.
Lower absorption and inventory/backlog contraction
Weaker absorption and a smaller combined backlog/spec pool point to softer underlying demand and tighter near-term revenue visibility. Slower sales velocity increases incentives, inventory carrying costs, and execution risk, pressuring margins and prolonging recovery timelines across multiple quarters.
Meritage (MTH) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$5.28B
Dividend Yield2.62%
Average Volume (3M)1.02M
Price to Earnings (P/E)12.4
Beta (1Y)0.76
Revenue Growth-6.06%
EPS Growth-32.39%
CountryUS
Employees1,898
SectorConsumer Cyclical
Sector Strength84
IndustryResidential Construction
Share Statistics
EPS (TTM)1.20
Shares Outstanding66,800,670
10 Day Avg. Volume808,392
30 Day Avg. Volume1,021,904
Financial Highlights & Ratios
PEG Ratio-0.25
Price to Book (P/B)0.90
Price to Sales (P/S)0.80
P/FCF Ratio50.34
Enterprise Value/Market Cap1.25
Enterprise Value/Revenue1.13
Enterprise Value/Gross Profit5.71
Enterprise Value/Ebitda11.19
Forecast
1Y Price Target
$82.57Price Target Upside6.09% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering9
EPS Forecast (FY)5.79
Revenue Forecast (FY)$5.81B
Meritage Business Overview & Revenue Model
Company DescriptionMeritage Homes Corporation, together with its subsidiaries, designs and builds single-family homes in the United States. The company operates through two segments, Homebuilding and Financial Services. It acquires and develops land; and constructs, markets, and sells homes for first-time and first move-up buyers. The company also offers title insurance and closing/settlement services to its homebuyers. It builds and sells homes in Texas, Arizona, California, Colorado, Florida, North Carolina, South Carolina, Georgia, and Tennessee under the Meritage Homes brand name. Meritage Homes Corporation was founded in 1985 and is based in Scottsdale, Arizona.
How the Company Makes MoneyMeritage generates revenue primarily through the sale of new homes, which accounts for the majority of its earnings. The company operates in various geographic markets, allowing it to capitalize on regional demand for housing. In addition to home sales, Meritage also earns income from land development activities and the sale of residential lots to other builders. Strategic partnerships with suppliers and subcontractors enable the company to manage costs effectively and maintain quality construction. Furthermore, Meritage's focus on energy-efficient homes allows it to appeal to environmentally conscious buyers, potentially leading to higher sales prices and profit margins. The company's ability to navigate market trends and adapt to changing consumer preferences plays a crucial role in its revenue generation.
Meritage Earnings Call Summary
Earnings Call Date:Jan 28, 2026
(Q4-2025)
| % Change Since: |
Next Earnings Date:Apr 29, 2026
Earnings Call Sentiment Neutral
The call presented a mixed picture: Meritage demonstrated operational strengths (record backlog conversion, faster cycle times, disciplined spec management, direct cost savings, strong liquidity) and aggressive capital returns (robust buybacks and dividends). However, those positives were offset by meaningful near-term weaknesses — lower revenue and closings, substantial margin compression, sizable nonrecurring land walkaway and impairment charges, elevated incentives, and reduced absorption/starts — leading management to adopt a conservative near-term posture. The company emphasizes long-term confidence in its strategy and a healthy balance sheet but faces material short-term profitability and demand headwinds.Q4-2025 Updates
Positive Updates
Exceptional Backlog Conversion and Faster Cycle Times
All-time high backlog conversion rate of 221% in Q4 (benefiting from a 60-day closing guarantee); cycle times improved to sub-110 calendar days, enabling a higher share of intra-quarter deliveries and greater operational flexibility.
Community Count Growth and Market Footprint Expansion
Ending community count rose 15% year-over-year to 336 communities (all-time high); opened 35 new communities in Q4 and over 160 communities in full year 2025; management expects another 5%–10% community count growth in 2026.
Strong Capital Returns and Share Repurchases
Returned ~$179 million of capital to shareholders in Q4 via buybacks and dividends; repurchased ~2.2 million shares in Q4 at an average discount of ~12% to 2025 year-end book value; full-year 2025 buybacks totaled $295 million (reducing shares outstanding by ~6%) and $514 million remains available under the repurchase program.
Healthy Balance Sheet and Liquidity
Cash of $775 million and no draws on credit facility at December 31, 2025; net debt-to-cap of 16.9% (well within the mid-20% ceiling), supporting planned capital deployment and land flexibility.
Operational Cost Improvements
Direct construction cost savings of nearly 4% per square foot year-over-year on more recent starts; management highlighted improved back-office productivity from technology investments and targeted SG&A savings.
Spec Inventory Management
Total spec homes of ~5,800 at quarter end (down 17% year-over-year and 8% sequentially); specs per store declined to 17 from 24 a year ago, producing a 5-month supply in line with the 4–6 month target and positioning for the spring selling season.
Guidance and Prudence
Company guided 2026 full-year closings and home closing revenue in line with 2025 (assumes no material market changes); Q1 2026 outlook: 3,000–3,300 closings, $1.13B–$1.24B revenue, and home closing gross margin of 18%–19%, reflecting conservative near-term planning.
Customer Credit Quality and Realtor Relationships
Customer credit metrics (FICO, DTI, LTV) remain consistent with historical averages; co-broke capture rate in the low 90s and 40% repeat realtor volume, supporting sales-channel strength.
Negative Updates
Decline in Revenue and Volume
Q4 home closing revenue of $1.4 billion was down 12% year-over-year, driven by 7% lower home closing volume and a 5% decline in ASP on closings to $375,000; full-year 2025 home closing revenue fell 9% to $5.8 billion and closings were down 4% versus prior year.
Margin Compression
Q4 adjusted home closing gross margin decreased to 19.3% (400 basis points lower than Q4 2024 adjusted margin of 23.3%); Q4 GAAP home closing gross margin was 16.5% vs 23.2% prior year. Full-year 2025 adjusted gross margin was 20.8%, down 420 basis points from 25.0% in 2024.
Significant EPS Declines
Q4 2025 adjusted diluted EPS of $1.67 declined ~30% year-over-year from $2.39; full-year 2025 adjusted diluted EPS was $7.05 compared to $10.79 in 2024 (approximately a 35% decrease).
Nonrecurring Charges and Land Walkaways
Q4 incurred $42.9 million of nonrecurring charges, including $27.9 million in terminated land deal walkaway charges (over ~3,400 lot terminations) and $7.8 million of real estate inventory impairments, pressuring quarterly margins and net lot activity.
Elevated Incentive Environment and ASP Pressure
Higher take-rate of incentives pressured ASPs and margins; management noted incentive utilization remained several hundred basis points above historical averages and expects elevated incentive levels to persist near term.
Lower Absorption and Starts
Q4 average absorption pace fell to 3.2 net sales per month (down 18% year-over-year for the quarter and below the company's long-term target of 4 net sales per month); starts moderated to ~2,700 homes in Q4 (24% less than prior-year Q4 and 12% lower than Q3).
Inventory and Backlog Contraction
Combined specs and backlog decreased to ~7,000 units at year-end 2025 from ~8,600 a year ago (down ~19%); ending backlog declined ~24% year-over-year from ~1,500 to ~1,200 homes, reflecting softer demand and intentional pacing decisions.
Increased Cancellation Rate and Market Weakness
Cancellation rate ticked up to 14% in Q4 (slightly below historical mid- to high-teens); management cited persistent affordability headwinds, elevated mortgage rates, and deteriorating buyer confidence as continuing near-term challenges.
Company Guidance
Management guided full‑year 2026 to be roughly in line with 2025 on both units and home closing revenue (2025: ~14,650 homes; $5.8B), and provided Q1 2026 guidance of 3,000–3,300 closings, $1.13–$1.24B of home closing revenue, home closing gross margin of 18%–19%, an effective tax rate of ~24% and diluted EPS of $0.87–$1.13. They reiterated longer‑term operating targets — average absorption of ~4 net sales/month, long‑term gross margin of 22.5%–23.5%, SG&A target ~9.5% and backlog conversion target of 175%–200% — and expect community count growth of 5%–10% off year‑end 336. On capital allocation they committed to redeploy $400M to buybacks in 2026 (programmatic $100M/quarter), forecast up to $2B of land acquisition/development spend, and enter the year with $775M cash, net debt‑to‑cap of 16.9% (ceiling mid‑20s) and $514M available under the repurchase program.Meritage Financial Statement Overview
Summary
Profitability is weakening: 2025 revenue declined and margins compressed sharply, driving a large net income drop. The balance sheet remains reasonably healthy with moderate leverage, but cash generation is a key concern given volatile operating cash flow and weak cash conversion versus earnings, alongside higher debt in 2025.Income Statement
Profitability remains solid but is clearly rolling over. Revenue declined in 2025 (-3.1%) after modest growth in 2024, and margins compressed meaningfully (gross margin ~19.7% in 2025 vs ~25.0% in 2024). Net income fell sharply in 2025 ($453M vs $786M in 2024), driving net margin down to ~7.7% from ~12.3%. While the business has shown strong profitability in prior years (notably 2021–2023), the latest year reflects a weaker pricing/volume environment and higher operating pressure.63
Positive
Balance Sheet
Balance sheet looks generally healthy with moderate leverage. Debt-to-equity is ~0.35 in 2025 (still reasonable for the industry), and equity has continued to build to ~$5.20B. Returns on equity remain positive but have cooled materially (about 8.7% in 2025 vs ~15.3% in 2024 and higher in 2021–2023), consistent with the earnings slowdown. Total debt increased in 2025, which is manageable today but reduces flexibility if profitability stays under pressure.72
Positive
Cash Flow
Cash generation is the weak spot and has been volatile. Operating cash flow swung from negative in 2024 (-$228M) to modestly positive in 2025 ($118M), but remains low relative to earnings in 2025 (operating cash flow to net income ~0.20). Free cash flow was positive in 2025 ($93M) but fell steeply versus prior years, reflecting working-capital/inventory dynamics typical of homebuilders but still a risk signal when combined with declining profits.44
Neutral
| Breakdown | Dec 2025 | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|
Income Statement | |||||
| Total Revenue | 5.86B | 6.40B | 6.14B | 6.29B | 5.14B |
| Gross Profit | 1.15B | 1.60B | 1.52B | 1.80B | 1.44B |
| EBITDA | 562.76M | 984.30M | 927.72M | 1.31B | 996.82M |
| Net Income | 453.01M | 786.19M | 738.75M | 992.19M | 737.44M |
Balance Sheet | |||||
| Total Assets | 7.65B | 7.16B | 6.35B | 5.77B | 4.82B |
| Cash, Cash Equivalents and Short-Term Investments | 775.16M | 651.55M | 921.23M | 861.56M | 618.34M |
| Total Debt | 1.89B | 1.39B | 1.06B | 1.17B | 1.19B |
| Total Liabilities | 2.46B | 2.02B | 1.74B | 1.82B | 1.76B |
| Stockholders Equity | 5.20B | 5.14B | 4.61B | 3.95B | 3.04B |
Cash Flow | |||||
| Free Cash Flow | 92.57M | -256.23M | 317.38M | 378.30M | -177.76M |
| Operating Cash Flow | 118.29M | -227.58M | 355.57M | 405.27M | -152.09M |
| Investing Cash Flow | -57.70M | -44.07M | -43.62M | -32.29M | -26.82M |
| Financing Cash Flow | 63.01M | 1.98M | -252.28M | -129.76M | 51.63M |
Meritage Technical Analysis
Positive
77.83
Price Trends
72.18
Positive
70.71
Positive
70.48
Positive
Market Momentum
1.94
Negative
58.05
Neutral
50.33
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MTH, the sentiment is Positive. The current price of 77.83 is above the 20-day moving average (MA) of 74.80, above the 50-day MA of 72.18, and above the 200-day MA of 70.48, indicating a bullish trend. The MACD of 1.94 indicates Negative momentum. The RSI at 58.05 is Neutral, neither overbought nor oversold. The STOCH value of 50.33 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for MTH.
Meritage Risk Analysis
Meritage disclosed 32 risk factors in its most recent earnings report. Meritage reported the most risks in the "Production" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Meritage Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $6.59B | 8.64 | 12.87% | ― | 6.98% | 9.74% | |
73 Outperform | $3.91B | 13.68 | 9.47% | ― | -16.60% | -29.85% | |
71 Outperform | $3.71B | 9.63 | 13.20% | ― | 4.77% | -9.30% | |
70 Outperform | $4.16B | 10.69 | 10.70% | 1.76% | -10.01% | -27.81% | |
69 Neutral | $8.89B | 35.30 | 36.66% | 1.20% | 2.12% | 3.08% | |
61 Neutral | $18.38B | 12.79 | -2.54% | 3.03% | 1.52% | -15.83% | |
60 Neutral | $5.28B | 12.44 | 8.76% | 2.62% | -6.06% | -32.39% |
* Consumer Cyclical Sector Average
MTH
Meritage
77.83
7.32
10.38%
KBH
KB Home
65.30
5.23
8.70%
MHO
M/I Homes
143.46
27.33
23.53%
TPH
Tri Pointe
46.31
14.86
47.25%
TMHC
Taylor Morrison
67.91
7.33
12.10%
IBP
Installed Building Products
325.43
162.94
100.28%
Meritage Corporate Events
Executive/Board Changes
Meritage Board Member Resignation Prompts Director Count Reduction
Neutral
Feb 19, 2026
On February 17, 2026, Meritage Homes Corporation announced that board member Dennis V. Arriola would step down from the Board of Directors, effective March 31, 2026, with the company stating that his resignation was not due to any disagreement. Following this decision, the board acted under its amended and restated bylaws to reduce its size from 12 to 11 directors, signaling a modest governance adjustment but no broader strategic shift indicated for stakeholders.
The most recent analyst rating on (MTH) stock is a Buy with a $89.00 price target. To see the full list of analyst forecasts on Meritage stock, see the MTH Stock Forecast page.
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.