If EPS Growth Is Important To You, Meritage Homes (NYSE:MTH) Presents An Opportunity
For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.
If this kind of company isn't your style, you like companies that generate revenue, and even earn profits, then you may well be interested in Meritage Homes (NYSE:MTH). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Meritage Homes with the means to add long-term value to shareholders.
View our latest analysis for Meritage Homes
How Fast Is Meritage Homes Growing Its Earnings Per Share?
Meritage Homes has undergone a massive growth in earnings per share over the last three years. So much so that this three year growth rate wouldn't be a fair assessment of the company's future. As a result, we'll zoom in on growth over the last year, instead. In impressive fashion, Meritage Homes' EPS grew from US$12.87 to US$22.42, over the previous 12 months. It's not often a company can achieve year-on-year growth of 74%.
One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The music to the ears of Meritage Homes shareholders is that EBIT margins have grown from 14% to 21% in the last 12 months and revenues are on an upwards trend as well. That's great to see, on both counts.
The chart below shows how the company's bottom and top lines have progressed over time. Click on the chart to see the exact numbers.
While we live in the present moment, there's little doubt that the future matters most in the investment decision process. So why not check this interactive chart depicting future EPS estimates, for Meritage Homes?
Are Meritage Homes Insiders Aligned With All Shareholders?
It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. So it is good to see that Meritage Homes insiders have a significant amount of capital invested in the stock. With a whopping US$58m worth of shares as a group, insiders have plenty riding on the company's success. This would indicate that the goals of shareholders and management are one and the same.
Does Meritage Homes Deserve A Spot On Your Watchlist?
Meritage Homes' earnings per share growth have been climbing higher at an appreciable rate. That sort of growth is nothing short of eye-catching, and the large investment held by insiders should certainly brighten the view of the company. The hope is, of course, that the strong growth marks a fundamental improvement in the business economics. Based on the sum of its parts, we definitely think its worth watching Meritage Homes very closely. Even so, be aware that Meritage Homes is showing 2 warning signs in our investment analysis , you should know about...
The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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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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