Entering text into the input field will update the search result below

Meritage Homes: Why I See ~50% Upside In The Next Two Years

Nov. 01, 2021 10:56 AM ETMeritage Homes Corporation (MTH)5 Comments
GS Analytics profile picture
GS Analytics


  • Meritage Homes recently reported strong results with all-time high gross margins and EPS.
  • The company is poised to increase its active community count substantially over the next nine months.
  • While I expect absorption and gross margins to normalize, even after building it in my forecasts, I am seeing a significant upside.
Spurred By Rising Prices, Phoenix Undergoes A New Housing Boom

Justin Sullivan/Getty Images News

Meritage Homes (NYSE:MTH) recently reported strong Q3 2021 results with both earnings and revenues beating consensus estimates. The company’s revenues increased ~11% YoY to $1.26 bn (vs. $1.19 bn consensus estimates) as it navigated supply chain issues to deliver 3,112 homes in the quarter, which

This article was written by

GS Analytics profile picture
We primarily focus on GARP (Growth at reasonable Price) opportunities in industrial, consumer, and technology sectors. Please click the "Follow" button to receive our latest research. If you have any questions, feel free to reach out to us through the comments section of our articles or SA messaging functionality.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (5)

Berserker Bob profile picture
I see everyone stressing over rate increases, but I would causation agaisnt giving rate hikes so much gravity in your list of concerns. Rates go up because of inflation and/or a hot economy. Both of those macro factors at least off-set a rate hike if not net a positive for companies with real earnings and strong balance sheets. Very long MTH.

Disclaimer - This is provided the rate increases are methodical and controlled, not knee jerk insane 2-3% at a time hikes.
@GS Analytics Thank you for the detailed analysis of the future EPS projections for $MTH for 2021, 2022, and 2023. As a value investor, I'm long $MTH, $MHO, and $CCS. I like the forward PE's of MHO (4.46x), CCS (4.75x), and MTH (5.64). My research on SA shows they are #1, #2, and #3 among major homebuilders for forward PE's. But, they're also projecting well for EPS growth projections on SA: MTH is #3 with 51.32%, CCS is #1 at 62.21%, and MHO is #4 at 46.77%. Unless I'm reading those #'s wrong, it seems good to have such low forward PE's combined with great EPS growth projections. I agree that the pent-up demand for SF housing units in the US looks good right now. I think the outlook for these homebuilders is good for at least 2-4 more quarters. What I'm concerned about is rising 30-year mortgage interest rates during the next 12-24 months that will limit what potential homebuyers can pay for new homes. At some point, buyers will hit qualification thresholds and what may give is the ASP of the homebuilder's homes. I therefore agree with your projection of ASP's peaking in 2022 and dropping off some for 2023. I just hope they won't drop off more than your projection of $410k down to $399k which is only about a 3% drop in ASP's. I hope you're correct but I believe it may be worse than that. Long $MTH.
@Investor-Still-Learning Mortgage rates moving up bothers me too. The author claims that MTH is focusing more on starter homes; these are presumably smaller less expensive homes. But doesn't rising mortgage rates have more to do with how much home you can afford and not whether or not buying a home - any size home - is affordable? There is still a huge pent up demand for SFH's and younger folks are tired of paying rent - annual increase for which will no doubt follow i-rates/inflation.
@MinnGuy I agree with your assessment. Higher mortgage rates will just shift the buyers down a rung to a lower priced home, rather than knocking them out of the buying process. Therefore, MTH should benefit as they are focusing more on starter homes than some other builders. Good point.
That is well done. Thanks. A key question is
You model lower EPS in 2023 than in 2022. Will MTH have a below-avg P/TBV when its earnings are in actual decline. Do you know what its P/TBV has been during periods just before & while its earnings began falling Y/Y?

I assume the P/TBV will turn up before the Y/Y profit growth does as the market will anticipate the upturn on Y/Y #s. But how does it act just as Y/Y #s start falling?
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

About MTH

SymbolLast Price% Chg
Market Cap
Yield (TTM)
Rev Growth (YoY)
Short Interest
Prev. Close
Compare to Peers

More on MTH

Related Stocks

SymbolLast Price% Chg
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.