At US$90.31, Is It Time To Put M/I Homes, Inc. (NYSE:MHO) On Your Watch List?

M/I Homes, Inc. (NYSE:MHO), might not be a large cap stock, but it led the NYSE gainers with a relatively large price hike in the past couple of weeks. As a US$2.5b market-cap stock, it seems odd M/I Homes is not more well-covered by analysts. Although, there is more of an opportunity for mispricing in stocks with low coverage, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on M/I Homes’s outlook and valuation to see if the opportunity still exists.

Check out our latest analysis for M/I Homes

What's The Opportunity In M/I Homes?

According to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average, the stock price seems to be justfied. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that M/I Homes’s ratio of 5.2x is trading slightly below its industry peers’ ratio of 8.34x, which means if you buy M/I Homes today, you’d be paying a decent price for it. And if you believe that M/I Homes should be trading at this level in the long run, then there’s not much of an upside to gain over and above other industry peers. Is there another opportunity to buy low in the future? Since M/I Homes’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

What kind of growth will M/I Homes generate?

Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by a double-digit 12% over the next couple of years, the outlook is positive for M/I Homes. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.

What This Means For You

Are you a shareholder? It seems like the market has already priced in MHO’s positive outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at MHO? Will you have enough conviction to buy should the price fluctuate below the industry PE ratio?

Are you a potential investor? If you’ve been keeping an eye on MHO, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive outlook is encouraging for MHO, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.

Diving deeper into the forecasts for M/I Homes mentioned earlier will help you understand how analysts view the stock going forward. Luckily, you can check out what analysts are forecasting by clicking here.

If you are no longer interested in M/I Homes, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.