Stock Analysis

Is Now The Time To Put Meritage Homes (NYSE:MTH) On Your Watchlist?

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NYSE:MTH
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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it currently lacks a track record of revenue and profit. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss-making companies are always racing against time to reach financial sustainability, so investors in these companies may be taking on more risk than they should.

So if this idea of high risk and high reward doesn't suit, you might be more interested in profitable, growing companies, like Meritage Homes (NYSE:MTH). Even if this company is fairly valued by the market, investors would agree that generating consistent profits will continue to provide Meritage Homes with the means to add long-term value to shareholders.

See our latest analysis for Meritage Homes

How Fast Is Meritage Homes Growing Its Earnings Per Share?

Over the last three years, Meritage Homes has grown earnings per share (EPS) at as impressive rate from a relatively low point, resulting in a three year percentage growth rate that isn't particularly indicative of expected future performance. So it would be better to isolate the growth rate over the last year for our analysis. Meritage Homes' EPS shot up from US$14.89 to US$24.76; a result that's bound to keep shareholders happy. That's a fantastic gain of 66%.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Meritage Homes shareholders can take confidence from the fact that EBIT margins are up from 15% to 22%, and revenue is growing. That's great to see, on both counts.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NYSE:MTH Earnings and Revenue History September 18th 2022

The trick, as an investor, is to find companies that are going to perform well in the future, not just in the past. While crystal balls don't exist, you can check our visualization of consensus analyst forecasts for Meritage Homes' future EPS 100% free.

Are Meritage Homes Insiders Aligned With All Shareholders?

It should give investors a sense of security owning shares in a company if insiders also own shares, creating a close alignment their interests. Meritage Homes followers will find comfort in knowing that insiders have a significant amount of capital that aligns their best interests with the wider shareholder group. Given insiders own a significant chunk of shares, currently valued at US$52m, they have plenty of motivation to push the business to succeed. That's certainly enough to let shareholders know that management will be very focussed on long term growth.

Does Meritage Homes Deserve A Spot On Your Watchlist?

For growth investors, Meritage Homes' raw rate of earnings growth is a beacon in the night. With EPS growth rates like that, it's hardly surprising to see company higher-ups place confidence in the company through continuing to hold a significant investment. The growth and insider confidence is looked upon well and so it's worthwhile to investigate further with a view to discern the stock's true value. It is worth noting though that we have found 3 warning signs for Meritage Homes (2 don't sit too well with us!) that you need to take into consideration.

The beauty of investing is that you can invest in almost any company you want. But if you prefer to focus on stocks that have demonstrated insider buying, here is a list of companies with insider buying in the last three months.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

Valuation is complex, but we're helping make it simple.

Find out whether Meritage Homes is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About NYSE:MTH

Meritage Homes

Meritage Homes Corporation, together with its subsidiaries, designs and builds single-family homes in the United States.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation3
Future Growth0
Past Performance5
Financial Health5
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Excellent balance sheet with solid track record.