Will This Upgrade Help Meritage Homes (MTH) Stock Today?

NEW YORK (TheStreet) -- Meritage  Homes Corp.  (MTH) was upgraded to "neutral" from "sell" at UBS (UBS) on Monday, based on a valuation call, the firm said.

UBS said it is upgrading the company's rating "as valuation moves closer to fundamentals."

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TheStreet Ratings team rates MERITAGE HOMES CORP as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate MERITAGE HOMES CORP (MTH) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, robust revenue growth, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • MERITAGE HOMES CORP reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, MERITAGE HOMES CORP increased its bottom line by earning $3.24 versus $2.77 in the prior year. This year, the market expects an improvement in earnings ($3.50 versus $3.24).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Household Durables industry. The net income increased by 110.8% when compared to the same quarter one year prior, rising from $12.04 million to $25.38 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 26.8%. Since the same quarter one year prior, revenues rose by 21.6%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • MTH's debt-to-equity ratio of 0.92 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further.
  • You can view the full analysis from the report here: MTH Ratings Report
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