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Meritage Homes Corporation Message Board

  • valuguy2002 valuguy2002 Aug 2, 2007 1:14 PM Flag

    MTH Math For Dummies (that's you shorts)

    Current enterprise value of MTH is $1.25 billion...take a look at the balance sheet...back out the full $150 million in option related deposits (assume they are all worthless and MTH walks away from all options)...back out $119 million in investments in unconsolidated entities...back out Goodwill (assume all purchases sucked and should be written off) and you are still left with $1.6 billion in Real Estate...so here we go...

    We've written everything else off as worthless...how much would we need to write down Real Estate to warrant a $19 share price for MTH?

    We'd have to write down Real Estate by 22%!

    Of course this is a liquidation scenario and WRONGLY assumes that MTH will never make another nickel again the in the future!!!

    Point is MTH and and many other HBs are now priced out of TOTAL FEAR...and even the worst case scenario offers no value for shorts from $19/sh.

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    • I agree People will buy houses Not today but down the road

    • I agree People will buy houses Not today but down the road

    • galaxysportsinc@sbcglobal.net galaxysportsinc Aug 15, 2007 5:22 PM Flag

      The answer - wait until it gets to $1.00 then it can only go down a buck. Limited downside.

    • Shouldn't debt be considered in this exercise of establishing value?

    • Let's assume you are correct and that book value is $20.00/share. Let's also assume that this is the bottom (which I don't believe). Do you think that this company is going to start making a profit immediately, like next quoter (sorry for the spelling)? The point is that banks are over-exposed to the housing market and are reluctant to make loans but to the most credit-worthy among us, they have increased the interest rates to signal this. Now, what do higher interest rates and the elimination of 70% would-be buyers do to the price of existing homes? What about all those homes being foreclosed on and coming back on the market (Sub-prime)? These are Bank-owned and they do not have the luxury of waiting out the downturn, they're going to be sold off to the highest bidder putting more pressure on home prices. MTH will probably survive the downturn but there's going to be a few bad years ahead of them. This goes for all HB's not just MTH. Furthermore MTH has a high exposure in the CA, FL and Colorado markets which are going to see the biggest drop.
      I do not own MTH (short or long), I just think you are too quick call the bottom, this took years to develop, it will take years to sort out. Good luck to all.

      • 1 Reply to yoobeebad
      • Remember that the market always tries to predict the future, which is why we adjusted the Book Value down. Right now the official Book Value is something like $40/share.

        We are making the very pessimistic assumption that Goodwill and land options on book are all worthless, as is the land. The value of the inventory should probably be marked down a bit, too, but 50%? I don't think that is how much home prices are going to go down.

        In a few years, this will be a smaller company and it will be quite a few years before it is profitable again, but it has enough assets to easily survive and deep value investors are starting to take a look.

        Buffet just bought a big chunk in HOV. He might be accumulating MTH as we speak.

    • Hmm you maybe you should have kept reading EAC is up over 6% today. XEC also up EPL down.

    • I saw EPL and I stopped reading. That's an arbitrage situation. If you've got the stones for that one, I'd suggest you looking at LEND as well.

    • Well Im not a short but its a wash either way. One can play with numbers any way you want and maybe its worth $20 maybe $16

      BIG DEAL!

      I said on here before - there are quite a few energy stocks selling at less than half the net present value of their oil and gas. EAC I recommended at $27 maybe a week or two ago and its at $30 Meanwhile I panned MTH at $26 and whats it at now?? LOL

      XEC is still where I recommended it at - maybe 50cents below but its also a great buy and EPL may be selling for 1/3 of the value of its assets at $13.

      Housing will probably continue to decline but energy will appreciate. Count on it.

    • That's because there is alot to be fearful of. BTW, there is 19 points between 19 and zero! How's that for math!

      • 1 Reply to xemployee56
      • exactly the inane, irrational, inflammatory things that a disgruntled former employee with an ax to grind would say. Additionally, this poor chap doesn't know anything about the stock market or what even a basic term like book value means, he just wants the stock to go down, the main problem is that nobody and God I hope nobody gets their investment ideas from a message board and better yet I hope that nobody decides to buy or sell their stock based upon inflammatory short rhetoric or decides to buy because of long rhetoric, messages boards are entertaining and you can learn somethings from time to time, like the original post in this string. Good info.

 
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