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Should Value Investors Buy M/I Homes (MHO) Stock?

·3 min read

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

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.

Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.

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 an A grade for Value. The stock is trading with a P/E ratio of 7.20, which compares to its industry's average of 11.38. Over the past 52 weeks, MHO's Forward P/E has been as high as 13.34 and as low as 1.98, with a median of 7.18.

Another notable valuation metric for MHO is its P/B ratio of 1.25. 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. MHO's current P/B looks attractive when compared to its industry's average P/B of 1.27. Over the past 12 months, MHO's P/B has been as high as 1.35 and as low as 0.27, with a median of 1.08.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. MHO has a P/S ratio of 0.54. This compares to its industry's average P/S of 0.95.

Finally, investors will want to recognize that MHO has a P/CF ratio of 6.26. 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 8.76. Within the past 12 months, MHO's P/CF has been as high as 7.40 and as low as 1.96, with a median of 5.98.

These are only a few of the key metrics included in M/I 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, MHO looks like an impressive value stock at the moment.


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