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Meritage (MTH)
NYSE:MTH
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Meritage
(NYSE:MTH)
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Rating:69Neutral
Price Target:
$78.00
▲(14.10% Upside)
Meritage's overall stock score reflects a stable financial position and attractive valuation, offset by bearish technical indicators and challenges highlighted in the earnings call. The company's strong profitability and low P/E ratio are significant strengths, while the negative cash flows and market challenges present risks.
Positive Factors
Community Count Growth
The significant increase in community count enhances Meritage's market presence and potential revenue streams, indicating strategic expansion in high-demand areas.
Strong Backlog Conversion Rate
High backlog conversion rates suggest effective operational execution and strong demand fulfillment, supporting consistent revenue generation.
Healthy Balance Sheet
A strong balance sheet with low leverage provides financial stability and flexibility, enabling strategic investments and resilience in downturns.
Negative Factors
Decreased Revenue and Earnings
Declining revenue and earnings indicate potential challenges in market demand or pricing power, which could impact long-term profitability.
Increased Use of Incentives
Increased reliance on incentives may pressure margins and suggest underlying demand weaknesses, affecting long-term financial health.
Negative Cash Flow
Negative cash flow can limit the company's ability to fund operations and growth initiatives, posing a risk to financial sustainability.
Meritage (MTH) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$4.66B
Dividend Yield2.62%
Average Volume (3M)650.25K
Price to Earnings (P/E)9.1
Beta (1Y)0.74
Revenue Growth-6.06%
EPS Growth-32.39%
CountryUS
Employees1,898
SectorConsumer Cyclical
Sector Strength84
IndustryResidential Construction
Share Statistics
EPS (TTM)1.39
Shares Outstanding70,406,710
10 Day Avg. Volume423,300
30 Day Avg. Volume650,252
Financial Highlights & Ratios
PEG Ratio0.93
Price to Book (P/B)1.08
Price to Sales (P/S)0.87
P/FCF Ratio-21.75
Enterprise Value/Market Cap1.36
Enterprise Value/Revenue1.05
Enterprise Value/Gross Profit4.88
Enterprise Value/Ebitda9.10
Forecast
1Y Price Target
$84.71Price Target Upside23.92% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering7
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
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:Oct 28, 2025
(Q3-2025)
| % Change Since: |
Next Earnings Date:Jan 28, 2026
Earnings Call Sentiment Neutral
The earnings call reflected a challenging market environment with reduced revenue, earnings, and margins. Despite these challenges, there were positive aspects such as strong backlog conversion, community count growth, and shareholder returns. However, the significant use of incentives and impairments weigh heavily on the overall sentiment.Q3-2025 Updates
Positive Updates
Year-over-Year Increase in Orders
Orders grew by 4% year-over-year to 3,636 units despite softer market conditions.
Strong Backlog Conversion Rate
Achieved a 211% backlog conversion rate with 3,685 home deliveries and home closing revenue of $1.4 billion.
Community Count Growth
Reported a 20% year-over-year increase in community count, ending the quarter with 334 communities.
Shareholder Returns
Returned $85 million to shareholders in the third quarter, including $55 million in share repurchases.
Improved Cycle Times
Cycle times improved to approximately 105 calendar days from about 110 days in the previous quarter.
Negative Updates
Decreased Revenue and Earnings
Third quarter home closing revenue decreased by 12% year-over-year, and diluted EPS dropped by 48% from the prior year.
Increased Use of Incentives
Higher incentive usage due to lack of consumer confidence, with incentives impacting margins significantly.
Inventory Impairments and Charges
Recorded $14.5 million in combined real estate inventory impairments and terminated land deal charges.
Lower Gross Margins
Home closing gross margin fell to 19.1%, down from 24.8% in the prior year.
Reduced Starts
Starts were intentionally slowed by 19% year-over-year to align with softer demand and seasonality.
Company Guidance
During the Meritage Homes Third Quarter 2025 Analyst Call, the company provided several key metrics in its financial guidance. They reported a 4% year-over-year increase in orders to 3,636 units and achieved an average absorption pace of 3.8. The company delivered 3,685 homes, resulting in home closing revenue of $1.4 billion. The adjusted gross margin was reported at 20.1%, with an adjusted diluted EPS of $1.55, both in line with their guidance. Meritage Homes increased their book value per share by 8% year-over-year and ended the quarter with 334 communities, marking a 20% increase from the previous year. The company also maintained a strong balance sheet, with a net debt to capital ratio of 17.2% and returned $85 million to shareholders during the quarter. Looking ahead to Q4 2025, Meritage Homes projected home closings between 3,800 and 4,000 units, home closing revenue between $1.46 billion and $1.54 billion, and a gross margin of 19% to 20%, with a diluted EPS range of $1.51 to $1.70.Meritage Financial Statement Overview
Summary
Meritage demonstrates a stable financial position with strong profitability metrics and a solid balance sheet. However, the decline in revenue growth and negative cash flows highlight potential areas of concern that need to be addressed to sustain long-term growth and liquidity.Income Statement
Meritage's income statement shows a mixed performance. The TTM data indicates a decline in revenue growth rate by 2.79%, reflecting challenges in maintaining sales momentum. However, the company maintains a healthy gross profit margin of 21.46% and a net profit margin of 8.97%, indicating efficient cost management. The EBIT and EBITDA margins are also solid at 11.64% and 12.06% respectively, though they have decreased compared to the previous year.Balance Sheet
The balance sheet is robust with a low debt-to-equity ratio of 0.34, suggesting prudent financial leverage. The return on equity stands at 10.37%, which, while lower than previous years, still indicates effective use of equity. The equity ratio is strong, reflecting a solid capital structure with a significant portion of assets financed by equity.Cash Flow
Cash flow analysis reveals some concerns. The company has negative operating and free cash flows in the TTM period, indicating potential liquidity challenges. However, the free cash flow to net income ratio is positive at 1.12, suggesting that the company is generating cash relative to its net income, albeit less efficiently than before.| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 6.04B | 6.40B | 6.14B | 6.29B | 5.14B | 4.50B |
| Gross Profit | 1.30B | 1.60B | 1.52B | 1.80B | 1.44B | 1.00B |
| EBITDA | 693.93M | 984.30M | 927.72M | 1.31B | 996.82M | 585.03M |
| Net Income | 541.63M | 786.19M | 738.75M | 992.19M | 737.44M | 423.48M |
Balance Sheet | ||||||
| Total Assets | 7.76B | 7.16B | 6.35B | 5.77B | 4.82B | 3.86B |
| Cash, Cash Equivalents and Short-Term Investments | 728.94M | 651.55M | 921.23M | 861.56M | 618.34M | 745.62M |
| Total Debt | 1.89B | 1.39B | 1.06B | 1.17B | 1.19B | 1.08B |
| Total Liabilities | 2.47B | 2.02B | 1.74B | 1.82B | 1.77B | 1.52B |
| Stockholders Equity | 5.29B | 5.14B | 4.61B | 3.95B | 3.04B | 2.35B |
Cash Flow | ||||||
| Free Cash Flow | -252.58M | -256.23M | 317.38M | 378.30M | -177.76M | 510.43M |
| Operating Cash Flow | -224.95M | -227.58M | 355.57M | 405.27M | -152.09M | 530.36M |
| Investing Cash Flow | -53.68M | -44.07M | -43.62M | -32.29M | -26.82M | -18.23M |
| Financing Cash Flow | 176.00M | 1.98M | -252.28M | -129.76M | 51.63M | -85.97M |
Meritage Technical Analysis
Positive
68.36
Price Trends
68.24
Positive
71.00
Negative
69.19
Negative
Market Momentum
-0.70
Negative
51.91
Neutral
67.94
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 68.36 is above the 20-day moving average (MA) of 67.84, above the 50-day MA of 68.24, and below the 200-day MA of 69.19, indicating a neutral trend. The MACD of -0.70 indicates Negative momentum. The RSI at 51.91 is Neutral, neither overbought nor oversold. The STOCH value of 67.94 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 |
|---|---|---|---|---|---|---|---|
75 Outperform | $3.31B | 7.74 | 15.76% | ― | 4.77% | -9.30% | |
73 Outperform | $7.00B | 29.48 | 36.66% | 1.20% | 2.12% | 3.08% | |
73 Outperform | $2.65B | 9.62 | 9.47% | ― | -16.60% | -29.85% | |
71 Outperform | $3.58B | 9.37 | 10.72% | 1.76% | -10.01% | -27.81% | |
71 Outperform | $5.71B | 7.31 | 14.31% | ― | 6.98% | 9.74% | |
69 Neutral | $4.66B | 9.13 | 10.50% | 2.62% | -6.06% | -32.39% | |
61 Neutral | $18.38B | 12.79 | -2.54% | 3.03% | 1.52% | -15.83% |
* Consumer Cyclical Sector Average
MTH
Meritage
68.36
-3.77
-5.23%
KBH
KB Home
57.61
-4.53
-7.29%
MHO
M/I Homes
131.82
7.69
6.20%
TPH
Tri Pointe
32.59
-1.69
-4.93%
TMHC
Taylor Morrison
60.73
1.62
2.74%
IBP
Installed Building Products
273.89
104.83
62.01%
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.