Should You Investigate Meritage Homes Corporation (NYSE:MTH) At US$44.11?
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Meritage Homes Corporation (NYSE:MTH), which is in the consumer durables business, and is based in United States, received a lot of attention from a substantial price increase on the NYSE over the last few months. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at Meritage Homes’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for Meritage Homes
Is Meritage Homes still cheap?
According to my valuation model, Meritage Homes seems to be fairly priced at around 11% below my intrinsic value, which means if you buy Meritage Homes today, you’d be paying a fair price for it. And if you believe the company’s true value is $49.73, then there isn’t much room for the share price grow beyond what it’s currently trading. Is there another opportunity to buy low in the future? Since Meritage Homes’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
Can we expect growth from Meritage Homes?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. However, with a negative profit growth of -9.0% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Meritage Homes. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Currently, MTH appears to be trading around its fair value, but given the uncertainty from negative returns in the future, this could be the right time to reduce the risk in your portfolio. Is your current exposure to the stock beneficial for your total portfolio? And is the opportunity cost of holding a negative-outlook stock too high? Before you make a decision on the stock, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping an eye on MTH for a while, now may not be the most advantageous time to buy, given it is trading around its fair value. The price seems to be trading at fair value, which means there’s less benefit from mispricing. Furthermore, the negative growth outlook increases the risk of holding the stock. However, there are also other important factors we haven’t considered today, which can help gel your views on MTH should the price fluctuate below its true value.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Meritage Homes. You can find everything you need to know about Meritage Homes in the latest infographic research report. If you are no longer interested in Meritage Homes, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
