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Are Investors Undervaluing M/I Homes (MHO) Right Now?

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Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

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 - Free Report) is a stock many investors are watching right now. MHO is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with P/E ratio of 7.10 right now. For comparison, its industry sports an average P/E of 10.84. 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 7.55.

Another valuation metric that we should highlight is MHO's P/B ratio of 1.16. 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 stock's P/B looks attractive against its industry's average P/B of 1.27. Over the past year, MHO's P/B has been as high as 1.30 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. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. MHO has a P/S ratio of 0.46. This compares to its industry's average P/S of 0.79.

Finally, we should also recognize that MHO has a P/CF ratio of 6.36. 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. MHO's P/CF compares to its industry's average P/CF of 8.76. Within the past 12 months, MHO's P/CF has been as high as 9.61 and as low as 1.96, with a median of 6.26.

Value investors will likely look at more than just these metrics, but the above data helps show that M/I Homes is likely undervalued currently. And when considering the strength of its earnings outlook, MHO sticks out at as one of the market's strongest value stocks.


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