Meritage Homes (MTH): Assessing Valuation After Q3 Earnings Drop and New Guidance

Meritage Homes (MTH) reported third quarter results showing a sharp drop in net income and earnings per share compared to last year. The company also released new earnings guidance for the upcoming quarter. This update reflects a more cautious environment for investors.

See our latest analysis for Meritage Homes.

While Meritage Homes’ recent earnings guidance and buyback activity have made headlines, the real story is how sentiment has shifted over the past year. The company’s share price closed at $67.00, but the 1-year total shareholder return stands at a steep -28.1%, a sign that market confidence has faded compared to previous years of strong performance, including a 67% three-year total return. With near-term momentum still weak, investors are now weighing the potential for a turnaround against persistent risks.

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With shares trading well below analyst price targets and recent results raising questions, the real issue for investors is whether Meritage Homes is now undervalued or if the stock already reflects expectations for future growth.

Most Popular Narrative: 18.9% Undervalued

With a fair value estimate of $82.63 and shares last closing at $67.00, the most popular narrative views Meritage Homes as attractively valued despite recent share price weakness. This creates an intriguing backdrop for the long-term story that underpins the valuation.

Meritage's significant and accelerating growth in community count, including double-digit expansion for both 2025 and 2026, directly addresses the persistent undersupply of housing in the U.S. This positions the company to capture increased new-home demand and drive future revenue and earnings growth as macro headwinds abate.

Read the complete narrative.

Want the inside scoop on what most analysts believe will jumpstart this homebuilder's next chapter? The narrative’s foundation hinges on future expansion, margin bets, and a profitability target that might surprise you. If you’re curious about the specific forecasts and the bold assumptions fueling this undervaluation, dive in for the all-important numbers beneath the headline fair value.

Result: Fair Value of $82.63 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent affordability issues and limited visibility into future sales could easily challenge the optimistic outlook for Meritage Homes, particularly if market conditions deteriorate.

Find out about the key risks to this Meritage Homes narrative.

Another View: How Does the SWS DCF Model Stack Up?

Although Meritage Homes appears undervalued by market multiples, the SWS DCF model offers a different perspective. According to this discounted cash flow approach, the current share price is actually above fair value. This difference raises the question: which valuation truly reflects future reality?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Meritage Homes for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 875 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Meritage Homes Narrative

If you see things differently or want to dive into the numbers on your own terms, you can build your own perspective in just minutes. Do it your way

A great starting point for your Meritage Homes research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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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.

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