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Should Value Investors Buy Meritage Homes (MTH) Stock?

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Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

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 use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

Meritage Homes (MTH - Free Report) is a stock many investors are watching right now. MTH is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock holds a P/E ratio of 8.95, while its industry has an average P/E of 10.65. MTH's Forward P/E has been as high as 9.67 and as low as 5.48, with a median of 8.38, all within the past year.

Another valuation metric that we should highlight is MTH's P/B ratio of 1.28. The P/B ratio is used to compare a stock's market value with 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 1.73. Within the past 52 weeks, MTH's P/B has been as high as 1.47 and as low as 0.91, with a median of 1.19.

Finally, our model also underscores that MTH has a P/CF ratio of 7.88. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 9.86. Over the past 52 weeks, MTH's P/CF has been as high as 8.53 and as low as 4.55, with a median of 6.05.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Meritage Homes is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, MTH feels like a great value stock at the moment.

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