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Are Investors Undervaluing M/I Homes (MHO) Right Now?

Zacks Equity Research
·3 min read

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use tried-and-true metrics and fundamental analysis to find companies that they believe are undervalued at their current share price levels.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

M/I Homes (MHO) is a stock many investors are watching right now. MHO is currently sporting a Zacks Rank of #2 (Buy), as well as a Value grade of A. The stock is trading with P/E ratio of 4.69 right now. For comparison, its industry sports an average P/E of 11.09. Over the last 12 months, MHO's Forward P/E has been as high as 10.01 and as low as 1.98, with a median of 7.98.

Another valuation metric that we should highlight is MHO's P/B ratio of 0.66. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This company's current P/B looks solid when compared to its industry's average P/B of 1.38. Over the past year, MHO's P/B has been as high as 1.33 and as low as 0.27, with a median of 1.08.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. MHO has a P/S ratio of 0.3. This compares to its industry's average P/S of 0.49.

Finally, our model also underscores that MHO has a P/CF ratio of 4.72. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. MHO's P/CF compares to its industry's average P/CF of 9.69. Over the past year, MHO's P/CF has been as high as 9.85 and as low as 1.96, with a median of 8.

These figures are just a handful of the metrics value investors tend to look at, but they help show that M/I Homes is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, MHO feels like a great value stock at the moment.


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