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Should Value Investors Buy Meritage Homes (MTH) Stock?

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The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

Meritage Homes (MTH - Free Report) is a stock many investors are watching right now. MTH is currently sporting a Zacks Rank of #1 (Strong Buy) and an A for Value. The stock has a Forward P/E ratio of 6.64. This compares to its industry's average Forward P/E of 8.45. MTH's Forward P/E has been as high as 9.60 and as low as 3.20, with a median of 7.99, all within the past year.

We should also highlight that MTH has a P/B ratio of 1.16. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. MTH's current P/B looks attractive when compared to its industry's average P/B of 1.36. Over the past year, MTH's P/B has been as high as 1.30 and as low as 0.66, with a median of 1.03.

Finally, our model also underscores that MTH has a P/CF ratio of 5.73. 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 6.82. Over the past 52 weeks, MTH's P/CF has been as high as 6.45 and as low as 2.47, with a median of 4.03.

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

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