Is There Now An Opportunity In Meritage Homes Corporation (NYSE:MTH)?

Meritage Homes Corporation (NYSE:MTH), is not the largest company out there, but it saw significant share price movement during recent months on the NYSE, rising to highs of US$82.91 and falling to the lows of US$62.53. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Meritage Homes' current trading price of US$63.98 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Meritage Homes’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

What's The Opportunity In Meritage Homes?

Great news for investors – Meritage Homes is still trading at a fairly cheap price according to our price multiple model, where we compare the company's price-to-earnings ratio to the industry average. In this instance, we’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. we find that Meritage Homes’s ratio of 5.85x is below its peer average of 7.9x, which indicates the stock is trading at a lower price compared to the Consumer Durables industry. Although, there may be another chance to buy again in the future. This is because Meritage Homes’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Check out our latest analysis for Meritage Homes

Can we expect growth from Meritage Homes?

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. However, with a relatively muted profit growth of 2.4% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for Meritage Homes, at least in the short term.

What This Means For You

Are you a shareholder? Even though growth is relatively muted, since MTH is currently trading below the industry PE ratio, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current price multiple.

Are you a potential investor? If you’ve been keeping an eye on MTH for a while, now might be the time to make a leap. Its future profit outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy MTH. But before you make any investment decisions, consider other factors such as the strength of its balance sheet, in order to make a well-informed investment decision.

If you'd like to know more about Meritage Homes as a business, it's important to be aware of any risks it's facing. To help with this, we've discovered 2 warning signs (1 doesn't sit too well with us!) that you ought to be aware of before buying any shares in Meritage Homes.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.