What Meritage Homes (MTH)'s Shrinking Backlog and Margin Pressures Mean for Shareholders

• Recently, Meritage Homes experienced a decline in its backlog along with a decrease in free cash flow margin and return on invested capital, reflecting ongoing operational and profitability challenges as of September 2025.
• This signals intensifying competition or possible market saturation, which may be reshaping how the company approaches future growth opportunities and capital allocation.
• We'll explore how the shrinking backlog impacts Meritage Homes's investment narrative and future outlook for homebuilding demand and margins.

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Meritage Homes Investment Narrative Recap

To be a shareholder in Meritage Homes right now, you need to have confidence in the company’s ability to capture demand stemming from the US housing undersupply, especially through its expanded community count and focus on entry-level buyers. The recent decline in backlog and free cash flow margin presents a direct risk for near-term revenue visibility, while compressing margins remain the most important short-term headwind, these news-driven challenges are material for investors monitoring the sustainability of demand and profitability.

Among recent announcements, the upcoming Q3 2025 earnings release scheduled for October 28 takes on added importance as it will be the first to reflect the full operational and financial impact from the shrinking backlog and lower ROIC. With prior results already showing year-over-year declines in revenue and net earnings, the next quarter’s update will likely be watched closely for any signs of stabilization or further margin pressure in response to subdued orders.

Yet in contrast to past periods of strong backlog growth, investors should be aware of the rising risk...

Read the full narrative on Meritage Homes (it's free!)

Meritage Homes' narrative projects $7.1 billion in revenue and $549.0 million in earnings by 2028. This requires 4.8% yearly revenue growth and a $89.3 million decrease in earnings from $638.3 million today.

Uncover how Meritage Homes' forecasts yield a $86.12 fair value, a 19% upside to its current price.

Exploring Other Perspectives

Three views from the Simply Wall St Community put Meritage’s fair value anywhere between US$29.64 and US$225, showing how wide the gap between individual outlooks can be. Amid falling backlog and margin pressure, these diverse perspectives speak to just how many ways you can interpret Meritage’s shifting growth story.

Explore 3 other fair value estimates on Meritage Homes - why the stock might be worth less than half the current price!

Build Your Own Meritage Homes Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Meritage Homes research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.
• Our free Meritage Homes research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Meritage Homes' overall financial health at a glance.

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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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