Why Meritage Homes Stock Is on Investors’ Radar

Meritage Homes (MTH) has drawn fresh attention after recent trading, with the share price at $76.15 and mixed returns across different time frames, including a modest decline over the past year.

The recent 1 month share price return of 11.51% and 90 day gain of 8.57%, alongside a 14.98% year to date rise, contrasts with a 1 year total shareholder return decline of 3.15%. This suggests shorter term momentum has picked up even as longer term holders have seen more muted results.

If Meritage Homes has you reassessing the homebuilding space, it could also be a good moment to broaden your watchlist and check out auto manufacturers.

With Meritage Homes trading at $76.15, sitting below an analyst price target of $85.38 and carrying a solid value score, the key question is whether the market is overlooking potential upside or already reflecting expectations for future growth.

Most Popular Narrative: 8.4% Undervalued

With Meritage Homes last closing at $76.15 against a narrative fair value of $83.13, the current setup hinges on how future earnings and margins evolve.

Disciplined capital allocation, including substantial and opportunistic share buybacks enabled by a strong balance sheet and reduced land spend, signals confidence in undervaluation and is likely to drive higher EPS through lower share count, especially as industry consolidation trends favor larger, efficient builders like Meritage.

Curious what earnings path and profit margins sit behind that fair value, and why the projected P/E depends on a higher future multiple than today? The full narrative lays out the specific revenue run rate, margin profile, and valuation assumptions that need to line up before that price makes sense.

Result: Fair Value of $83.13 (UNDERVALUED)

However, this depends on affordability holding up for entry level buyers and on land and development costs not squeezing margins more than analysts currently expect.

Build Your Own Meritage Homes Narrative

If you see the story differently or prefer to sift through the numbers yourself, you can build your own Meritage Homes view in just a few minutes by starting with Do it your way.

A great starting point for your Meritage Homes research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.