Are Investors Undervaluing Meritage Homes (MTH) Right Now?
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 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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of 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.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
One company value investors might notice is Meritage Homes (MTH). 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 5.15, while its industry has an average P/E of 7.60. Over the last 12 months, MTH's Forward P/E has been as high as 8.98 and as low as 4.64, with a median of 6.
Another notable valuation metric for MTH is its P/B ratio of 1.59. The P/B ratio pits a stock's market value against 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 1.70. Over the past 12 months, MTH's P/B has been as high as 1.81 and as low as 1.26, with a median of 1.45.
Finally, investors should note that MTH has a P/CF ratio of 6.77. 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. MTH's current P/CF looks attractive when compared to its industry's average P/CF of 9.43. Over the past year, MTH's P/CF has been as high as 8.80 and as low as 5.44, with a median of 7.
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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