Meritage (MTH) AI Stock Analysis

• Market Cap: $4.78B
• Dividend Yield: 2.28%
• Average Volume (3M): 915.88K
• Price to Earnings (P/E): 6.9
• Beta (1Y): 1.08
• Revenue Growth: -0.68%
• EPS Growth: -7.99%
• Country: US
• Employees: 1,898
• Sector: Consumer Cyclical
• Sector Strength: 58
• Industry: Residential Construction
• EPS (TTM): 1.69
• Shares Outstanding: 71,830,260
• 10 Day Avg. Volume: 975,274
• 30 Day Avg. Volume: 915,882
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.00
• Price to Cash Flow (P/CF): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 1.26
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: 3.77
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $86.57
• Price Target Upside: 25.12% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 8

Meritage Homes shows a solid financial position with strengths in profitability and strategic growth. Valuation metrics suggest the stock is undervalued, providing potential upside. However, challenges in cash flow management, macroeconomic pressures, and slightly bearish technical indicators temper the outlook. The company's confidence in achieving its guidance and strategic initiatives support its market position, leading to an overall favorable stock score.

Positive Factors

Financial Performance

Meritage Homes reported 3Q24 EPS of $5.34, well ahead of estimates, driven by stronger home closings and better home sales gross margins.

Market Position

Meritage Homes has become the 5th largest US homebuilder by deliveries from No. 7 in 2015.

Strategic Initiatives

MTH's strategic shift to move-in ready homes has driven backlog conversions to record highs.

Negative Factors

Earnings Impact

Higher selling incentives on entry-level homes and potentially higher FHA mortgage premiums are likely to impact MTH's earnings.

Market Environment

MTH is experiencing pressure from a more competitive inventory environment, rising rates, and buyer anxiety over election uncertainty.

Rating Downgrade

The rating on MTH is downgraded to Market Perform due to near-term pressures on entry-level homebuilders, whose core first-time buyers are likely to face greater affordability challenges.

Meritage Business Overview & Revenue Model

Company Description

Meritage 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 Money

Meritage Homes Corporation generates revenue primarily through the sale of homes. The company purchases land, develops residential communities, and constructs homes that are then sold to consumers. Key revenue streams include the sale of single-family homes, with prices varying based on location, size, and features. Meritage also benefits from strategic partnerships with suppliers and contractors, which help reduce construction costs and improve operational efficiency. Additionally, the company may generate revenue from financial services related to home sales, such as mortgage origination and title services, although its primary focus remains on homebuilding. Market conditions, such as interest rates and regional housing demand, significantly influence Meritage's earnings.

Meritage Financial Statement Overview

Summary

Meritage Homes demonstrates a solid financial footing with robust profitability and a strong balance sheet. However, challenges in cash flow management and declining return on equity indicate areas for improvement. The company's position is strong within the industry, but enhancing cash flow generation and equity efficiency could drive future growth.

Income Statement

Meritage shows a strong performance in terms of profitability with a stable gross profit margin and a healthy net profit margin over the TTM period. The revenue growth trajectory is moderate, though slightly down from previous years. EBIT and EBITDA margins are also robust, indicating efficient core operations.

Balance Sheet

The balance sheet is solid with a strong equity base, as evidenced by an impressive equity ratio. The debt-to-equity ratio is manageable, suggesting a reasonable leverage level. However, return on equity has been declining, which might indicate pressure on profitability or efficiency in using shareholder funds.

Cash Flow

Cash flow management appears challenging, with negative free cash flow growth and a negative operating cash flow over the TTM. While the company has managed its financing activities, the negative free cash flow to net income ratio is a concern for liquidity and internal cash generation.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
6.39B	6.14B	6.30B	5.15B	4.51B
	Gross Profit
1.60B	1.52B	1.80B	1.44B	976.00M
	EBIT
958.35M	902.39M	1.29B	973.34M	535.74M
	EBITDA
1.03B	972.93M	1.31B	999.59M	566.79M
	Net Income Common Stockholders
786.19M	738.75M	992.19M	737.44M	423.48M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
651.55M	921.23M	861.56M	618.34M	745.62M
	Total Assets
7.16B	6.35B	5.77B	4.81B	3.86B
	Total Debt
1.39B	1.06B	1.15B	1.16B	1.02B
	Net Debt
740.15M	141.03M	289.09M	541.70M	274.46M
	Total Liabilities
2.02B	1.74B	1.82B	1.76B	1.52B
	Stockholders Equity
5.14B	4.61B	3.95B	3.04B	2.35B
Cash Flow		Free Cash Flow
-256.23M	317.38M	378.30M	-177.76M	510.43M
	Operating Cash Flow
-227.58M	355.57M	405.27M	-152.09M	530.36M
	Investing Cash Flow
-44.07M	-43.62M	-32.29M	-26.82M	-18.23M
	Financing Cash Flow
1.98M	-252.28M	-129.76M	51.63M	-85.97M

Meritage Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 69.19
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: 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 69.19 is above the 20-day moving average (MA) of 66.60, below the 50-day MA of 69.29, and below the 200-day MA of 83.82, indicating a neutral trend. The MACD of -0.16 indicates Negative momentum. The RSI at 53.56 is Neutral, neither overbought nor oversold. The STOCH value of 58.94 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for MTH.

Meritage Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TPH	77 Outperform	$2.78B	6.83	13.28%	―	10.82%	19.34%
GRBK	76 Outperform	$2.59B	7.11	24.29%	―	21.22%	24.90%
MTH	75 Outperform	$4.78B	6.91	14.58%	2.28%	-0.68%	-7.99%
TMHC	74 Outperform	$5.79B	6.71	15.97%	―	12.19%	23.15%
MHO	73 Outperform	$2.88B	5.69	19.02%	―	8.68%	8.39%
KBH	70 Outperform	$3.80B	6.67	15.58%	1.86%	5.54%	11.12%
Sector *	61 Neutral	$6.59B	11.77	3.06%	3.98%	2.56%	-20.85%

Meritage Corporate Events

Meritage Appoints Geisha Williams to Board of Directors

Meritage Homes Corporation has appointed Geisha Williams as an independent Class II Director to its Board of Directors, effective immediately. This appointment highlights the company’s commitment to board diversity and refreshment, with Williams bringing over three decades of experience in the energy and infrastructure sectors. Her extensive leadership background, including her role as former CEO of PG&E Corporation, is expected to enhance the board’s expertise and operational leadership, contributing to Meritage’s strategic growth and industry positioning.