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A Holistic Look At Meritage Homes Corporation (NYSE:MTH)

Simply Wall St

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Building up an investment case requires looking at a stock holistically. Today I've chosen to put the spotlight on Meritage Homes Corporation (NYSE:MTH) due to its excellent fundamentals in more than one area. MTH is a company that has been able to sustain great financial health, trading at an attractive share price. Below is a brief commentary on these key aspects. If you're interested in understanding beyond my broad commentary, read the full report on Meritage Homes here.

Undervalued with excellent balance sheet

MTH's ability to maintain an adequate level of cash to meet upcoming liabilities is a good sign for its financial health. This suggests prudent control over cash and cost by management, which is a crucial insight into the health of the company. MTH's has produced operating cash levels of 0.24x total debt over the past year, which implies that MTH's management has put its borrowings into good use by generating enough cash to cover a sufficient portion of borrowings. MTH's shares are now trading at a price below its true value based on its discounted cash flows, indicating a relatively pessimistic market sentiment. Investors have the opportunity to buy into the stock to reap capital gains, if MTH's projected earnings trajectory does follow analyst consensus growth, which determines my intrinsic value of the company. Also, relative to the rest of its peers with similar levels of earnings, MTH's share price is trading below the group's average. This supports the theory that MTH is potentially underpriced.

NYSE:MTH Intrinsic value, July 1st 2019

Next Steps:

For Meritage Homes, I've put together three important aspects you should further research:

  1. Future Outlook: What are well-informed industry analysts predicting for MTH’s future growth? Take a look at our free research report of analyst consensus for MTH’s outlook.
  2. Historical Performance: What has MTH's returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
  3. Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of MTH? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.