Meritage Homes (MTH) Strong On High Relative Volume Today

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer.

Trade-Ideas LLC identified Meritage Homes ( MTH) as a strong on high relative volume candidate. In addition to specific proprietary factors, Trade-Ideas identified Meritage Homes as such a stock due to the following factors:

  • MTH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $16.5 million.
  • MTH has traded 86,322 shares today.
  • MTH is trading at 2.52 times the normal volume for the stock at this time of day.
  • MTH is trading at a new high 3.01% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on MTH:

Meritage Homes Corporation designs and builds single-family detached homes in Arizona, California, Colorado, Texas, Florida, Georgia, North Carolina, South Carolina, and Tennessee in the United States. The company operates through two segments, Homebuilding and Financial Services. MTH has a PE ratio of 13. Currently there are 3 analysts that rate Meritage Homes a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Meritage Homes has been 527,900 shares per day over the past 30 days. Meritage Homes has a market cap of $1.7 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 2.27 and a short float of 17.9% with 14.26 days to cover. Shares are up 20.7% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Meritage Homes as a buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, good cash flow from operations and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 7.6%. Since the same quarter one year prior, revenues rose by 27.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.85, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • Net operating cash flow has significantly increased by 70.99% to -$38.19 million when compared to the same quarter last year. In addition, MERITAGE HOMES CORP has also vastly surpassed the industry average cash flow growth rate of -77.63%.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.

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