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Meritage Homes Corporation (MTH) Hits Fresh High: Is There Still Room to Run?
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Have you been paying attention to shares of Meritage Homes (MTH - Free Report) ? Shares have been on the move with the stock up 8.2% over the past month. The stock hit a new 52-week high of $183.25 in the previous session. Meritage Homes has gained 1.6% since the start of the year compared to the 8.8% move for the Zacks Construction sector and the 5.6% return for the Zacks Building Products - Home Builders industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on April 24, 2024, Meritage reported EPS of $5.06 versus consensus estimate of $3.54.
For the current fiscal year, Meritage is expected to post earnings of $19.38 per share on $6.16 billion in revenues. This represents a -2.76% change in EPS on a 0.81% change in revenues. For the next fiscal year, the company is expected to earn $21.03 per share on $6.56 billion in revenues. This represents a year-over-year change of 8.52% and 6.53%, respectively.
Valuation Metrics
Meritage may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Meritage has a Value Score of B. The stock's Growth and Momentum Scores are D and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 9.1X current fiscal year EPS estimates, which is a premium to the peer industry average of 9.1X. On a trailing cash flow basis, the stock currently trades at 8.5X versus its peer group's average of 8.9X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Meritage currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Meritage meets the list of requirements. Thus, it seems as though Meritage shares could have a bit more room to run in the near term.
How Does MTH Stack Up to the Competition?
Shares of MTH have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is PulteGroup, Inc. (PHM - Free Report) . PHM has a Zacks Rank of # 1 (Strong Buy) and a Value Score of B, a Growth Score of D, and a Momentum Score of B.
Earnings were strong last quarter. PulteGroup, Inc. beat our consensus estimate by 21.61%, and for the current fiscal year, PHM is expected to post earnings of $12.91 per share on revenue of $17.27 billion.
Shares of PulteGroup, Inc. have gained 0.3% over the past month, and currently trade at a forward P/E of 9.04X and a P/CF of 9.22X.
The Building Products - Home Builders industry is in the top 6% of all the industries we have in our universe, so it looks like there are some nice tailwinds for MTH and PHM, even beyond their own solid fundamental situation.
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Meritage Homes Corporation (MTH) Hits Fresh High: Is There Still Room to Run?
Have you been paying attention to shares of Meritage Homes (MTH - Free Report) ? Shares have been on the move with the stock up 8.2% over the past month. The stock hit a new 52-week high of $183.25 in the previous session. Meritage Homes has gained 1.6% since the start of the year compared to the 8.8% move for the Zacks Construction sector and the 5.6% return for the Zacks Building Products - Home Builders industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on April 24, 2024, Meritage reported EPS of $5.06 versus consensus estimate of $3.54.
For the current fiscal year, Meritage is expected to post earnings of $19.38 per share on $6.16 billion in revenues. This represents a -2.76% change in EPS on a 0.81% change in revenues. For the next fiscal year, the company is expected to earn $21.03 per share on $6.56 billion in revenues. This represents a year-over-year change of 8.52% and 6.53%, respectively.
Valuation Metrics
Meritage may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Meritage has a Value Score of B. The stock's Growth and Momentum Scores are D and B, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 9.1X current fiscal year EPS estimates, which is a premium to the peer industry average of 9.1X. On a trailing cash flow basis, the stock currently trades at 8.5X versus its peer group's average of 8.9X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Meritage currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Meritage meets the list of requirements. Thus, it seems as though Meritage shares could have a bit more room to run in the near term.
How Does MTH Stack Up to the Competition?
Shares of MTH have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is PulteGroup, Inc. (PHM - Free Report) . PHM has a Zacks Rank of # 1 (Strong Buy) and a Value Score of B, a Growth Score of D, and a Momentum Score of B.
Earnings were strong last quarter. PulteGroup, Inc. beat our consensus estimate by 21.61%, and for the current fiscal year, PHM is expected to post earnings of $12.91 per share on revenue of $17.27 billion.
Shares of PulteGroup, Inc. have gained 0.3% over the past month, and currently trade at a forward P/E of 9.04X and a P/CF of 9.22X.
The Building Products - Home Builders industry is in the top 6% of all the industries we have in our universe, so it looks like there are some nice tailwinds for MTH and PHM, even beyond their own solid fundamental situation.