Is Meritage Homes (MTH) a Great Value Stock Right Now?
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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
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.
One company value investors might notice is Meritage Homes (MTH). MTH is currently holding a Zacks Rank of #2 (Buy) and a Value grade of A. The stock is trading with a P/E ratio of 2.73, which compares to its industry's average of 4.09. Over the last 12 months, MTH's Forward P/E has been as high as 6.97 and as low as 2.46, with a median of 4.75.
Investors should also recognize that MTH has a P/B ratio of 0.83. 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 0.97. MTH's P/B has been as high as 1.65 and as low as 0.75, with a median of 1.31, over the past year.
Finally, our model also underscores that MTH has a P/CF ratio of 3.17. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. MTH's current P/CF looks attractive when compared to its industry's average P/CF of 4.25. MTH's P/CF has been as high as 7.47 and as low as 2.87, with a median of 5.70, all within the past year.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Meritage Homes is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, MTH feels like a great value stock at the moment.
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