Meritage Homes Stock Rises 9% in a Month: Still a Buy or Too Late?

Core Viewpoint - Meritage Homes Corporation (MTH) has experienced a stock rally of 8.8% over the past month, outperforming both the Zacks Building Products - Home Builders industry and the S&P 500 Index, indicating strong market performance and investor interest [1][2]. Group 1: Company Performance - The company benefits from resilient housing demand and its strategy of delivering quick-turn, affordable move-in-ready homes, which aligns with current market trends [2][4]. - MTH stock is trading above its 50-day and 200-day moving averages, indicating positive technical momentum [3]. - The company achieved an average of 4.5 net sales per month in Q2 2024, exceeding its target of 4 net sales per month, showcasing strong sales performance [8]. Group 2: Strategic Advantages - Meritage Homes employs a dynamic strategy focused on nearly complete homes before sale, akin to a just-in-time inventory model, which effectively meets consumer demand for immediate occupancy [4][7]. - The 60-day closing guarantee is a key highlight of this strategy, appealing to buyers in a fast-paced market [5]. - By targeting entry-level and first-move-up homebuyers, the company positions itself to cater to the largest segment of homebuyer demand, enhancing its market appeal [6]. Group 3: Market Context - The U.S. housing market shows signs of strength, with new single-family home sales reaching a seasonally adjusted annual rate of 739,000 units in July 2024, marking a 10.6% increase [10]. - Existing home sales also exceeded expectations in July, reversing a four-month decline, indicating a potential market rebound [11]. Group 4: Valuation and Estimates - MTH stock has a forward 12-month price-to-earnings ratio of 9.13X, below the industry average of 11.53X, suggesting an attractive valuation for investors [12]. - Analysts have revised earnings estimates upward for MTH, with current and next year estimates at $21.09 and $21.98, reflecting year-over-year growth rates of 5.8% and 4.2% respectively [14].