Are Investors Undervaluing Meritage Homes (MTH) Right Now?
The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.
Meritage Homes (MTH) is a stock many investors are watching right now. MTH is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock has a Forward P/E ratio of 5.43. This compares to its industry's average Forward P/E of 11.18. MTH's Forward P/E has been as high as 12.54 and as low as 3.90, with a median of 10.37, all within the past year.
Investors should also note that MTH holds a PEG ratio of 0.80. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. MTH's industry has an average PEG of 1.14 right now. MTH's PEG has been as high as 1.53 and as low as 0.58, with a median of 1.12, all within the past year.
Another notable valuation metric for MTH is its P/B ratio of 0.74. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 1.38. Within the past 52 weeks, MTH's P/B has been as high as 1.56 and as low as 0.53, with a median of 1.30.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. MTH has a P/S ratio of 0.38. This compares to its industry's average P/S of 0.39.
Finally, investors should note that MTH has a P/CF ratio of 5.37. This metric takes into account a company's operating cash flow and can be used to find stocks that are undervalued based on their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 9.69. Within the past 12 months, MTH's P/CF has been as high as 12.01 and as low as 3.85, with a median of 9.71.
These are only a few of the key metrics included in Meritage Homes's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, MTH looks like an impressive value stock at the moment.
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