Value
7.5/10data confidence 100%| Component | Sub-score |
|---|---|
| P/E | 8.3 |
| P/S | 9.7 |
| EV/EBITDA | 4.7 |
| Fwd P/E | 9.1 |
| PEG | 9.3 |
| Analyst target | 4.0 |
- ▸Forward P/E: 11.3x
- ▸PEG: 0.61
- ▸Attractively valued
MTH · Why this verdict
Why Meritage Homes (MTH) is rated SELL
Updated
Model-generated analysis — not investment advice. Not a registered investment advisor. Past performance does not guarantee future results.
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VerdictSELL
Overall score5.1/10
ConfidenceMEDIUM
MacroNEUTRAL
TrendMatrix Research · core thesis
Engine thesis — one sentence
Meritage Homes is a homebuilder trading at 11.2x forward earnings with strong price momentum, but quality falls below minimum thresholds at 3.3/10, revenues are declining -18% year-over-year, and a 3-of-4-quarter earnings miss streak raises serious concerns about near-term execution.
Falsifiable statement — pillar-level invalidators below. Engine-derived; not personalized advice.
Thesis pillars
| Pillar | Expectation | Trend |
|---|---|---|
Quality scores 3.3/10, below the minimum threshold, with a free cash flow quality flag at just 36% of net income, no competitive moat, and near-zero operating margin contribution, making the business vulnerable to any further housing market deterioration. Quality breakdown | Free cash flow conversion improves above 60% of net income within 12 months as order backlog deploys and land spend normalizes. | →Stable |
| CounterThe Piotroski F-Score of 6/9 is reasonable, and the current ratio is healthy at 5/10, suggesting the near-term financial stability of the business may be better than the headline quality score implies. | ||
Meritage Homes has missed earnings estimates in 3 of the last 4 quarters with an average negative surprise of -9.9%, including misses of -21.24% in January and -11.86% in April 2026, indicating systematic guidance misses that suggest management visibility is poor. Earnings | The company beats earnings estimates in at least 2 of the next 4 quarterly reports, reversing the miss trend. | →Stable |
| CounterThe one beat in July 2025 produced only a +3.45% surprise, and with revenues declining -18% year-over-year, the hurdle rate for beating consensus estimates is particularly challenging in the current housing market environment. | ||
Revenue is declining at -7% year-over-year with a score of 0.0/10 on revenue growth, alongside high leverage at a debt-to-equity ratio of 3.6, creating value-trap conditions where the apparently attractive forward price-to-earnings of 11.2x may reflect structural deterioration rather than temporary weakness. Bear case | Revenue growth returns to positive territory (above 0%) on a year-over-year basis within 12 months as housing demand stabilizes. | ↓Deteriorating |
| CounterThe stock scores 7.5/10 on value with a price-to-earnings-to-growth ratio of 0.58, indicating that even at depressed revenue levels the stock is not expensive, and any improvement in housing affordability could rapidly reverse revenue declines. | ||
Despite poor fundamentals, the stock scores 7.2/10 on momentum with RSI at 70, volume accumulation rising, and the stock trading above its 200-day moving average, suggesting the market is pricing in a housing recovery scenario ahead of the fundamentals. Momentum breakdown | The stock maintains its position above the 200-day moving average and RSI stays above 50 for at least 6 of the next 12 months. | ↑Improving |
| CounterAn RSI of 70 is in overbought territory, and a stock trading above its 200-day moving average while in a death-cross recovery (as noted in the technical setup) can be a false dawn that reverses sharply when the next negative earnings report arrives. | ||
Quality scores 3.3/10, below the minimum threshold, with a free cash flow quality flag at just 36% of net income, no competitive moat, and near-zero operating margin contribution, making the business vulnerable to any further housing market deterioration.
→StableQuality breakdown
- Expectation
- Free cash flow conversion improves above 60% of net income within 12 months as order backlog deploys and land spend normalizes.
CounterThe Piotroski F-Score of 6/9 is reasonable, and the current ratio is healthy at 5/10, suggesting the near-term financial stability of the business may be better than the headline quality score implies.
Meritage Homes has missed earnings estimates in 3 of the last 4 quarters with an average negative surprise of -9.9%, including misses of -21.24% in January and -11.86% in April 2026, indicating systematic guidance misses that suggest management visibility is poor.
→StableEarnings
- Expectation
- The company beats earnings estimates in at least 2 of the next 4 quarterly reports, reversing the miss trend.
CounterThe one beat in July 2025 produced only a +3.45% surprise, and with revenues declining -18% year-over-year, the hurdle rate for beating consensus estimates is particularly challenging in the current housing market environment.
Revenue is declining at -7% year-over-year with a score of 0.0/10 on revenue growth, alongside high leverage at a debt-to-equity ratio of 3.6, creating value-trap conditions where the apparently attractive forward price-to-earnings of 11.2x may reflect structural deterioration rather than temporary weakness.
↓DeterioratingBear case
- Expectation
- Revenue growth returns to positive territory (above 0%) on a year-over-year basis within 12 months as housing demand stabilizes.
CounterThe stock scores 7.5/10 on value with a price-to-earnings-to-growth ratio of 0.58, indicating that even at depressed revenue levels the stock is not expensive, and any improvement in housing affordability could rapidly reverse revenue declines.
Despite poor fundamentals, the stock scores 7.2/10 on momentum with RSI at 70, volume accumulation rising, and the stock trading above its 200-day moving average, suggesting the market is pricing in a housing recovery scenario ahead of the fundamentals.
↑ImprovingMomentum breakdown
- Expectation
- The stock maintains its position above the 200-day moving average and RSI stays above 50 for at least 6 of the next 12 months.
CounterAn RSI of 70 is in overbought territory, and a stock trading above its 200-day moving average while in a death-cross recovery (as noted in the technical setup) can be a false dawn that reverses sharply when the next negative earnings report arrives.
Per-dimension breakdown
Quality
3.3/10data confidence 100%| Component | Sub-score |
|---|---|
| ROE | 2.5 |
| ROA | 2.6 |
| Gross margin | 0.0 |
| Op margin | 2.3 |
| Net margin | 3.4 |
| Current ratio | 5.0 |
| FCF quality | 2.9 |
| Moat | 3.9 |
| Piotroski F | 6.7 |
- ▸Earnings quality RED FLAG: 36% FCF/NI
- ▸No competitive moat
Growth
2.9/10data confidence 67%| Component | Sub-score |
|---|---|
| Rev growth | 0.0 |
| EPS growth | 5.7 |
- ▸Declining revenue: -18%
Momentum
5.5/10data confidence 100%| Component | Sub-score |
|---|---|
| RSI | 7.7 |
| MACD | 0.0 |
| OBV | 10.0 |
| MA position | 6.0 |
| Volume | 3.6 |
- ▸Uptrend pullback (RSI 38) - buy opportunity
- ▸Volume accumulation (rising OBV)
- ▸Above 200-day MA
Sentiment
6.4/10data confidence 100%| Component | Sub-score |
|---|---|
| Analyst rating | 6.8 |
| Price target | 6.6 |
| erm sentiment | 5.5 |
- ▸Light analyst coverage (8.0) — signal dampened
Insider
7.3/10data confidence 75%| Component | Sub-score |
|---|---|
| materiality | 5.0 |
| holder change | 10.0 |
| notable moves | 7.0 |
- ▸Negligible insider selling — $79,066 (0.002% of mkt cap)
- ▸Institutions accumulating
Peer rank
3.5/10data confidence 80%| Component | Sub-score |
|---|---|
| value rank | 5.4 |
| quality rank | 3.4 |
| growth rank | 1.7 |
Technical
6.7/10data confidence 100%| Component | Sub-score |
|---|---|
| bollinger | 6.7 |
| support resistance | 8.0 |
| 52w position | 7.2 |
| gap | 5.0 |
Risk (lower is worse)
5.9/10data confidence 100%| Component | Sub-score |
|---|---|
| short interest | 6.3 |
| days to cover | 7.4 |
| volatility | 3.6 |
| put call | 5.2 |
| implied vol | 4.8 |
| beta | 5.6 |
| debt equity | 8.5 |
Catalyst
3.2/10data confidence 100%| Component | Sub-score |
|---|---|
| erm | 5.0 |
| earnings history | 0.0 |
| earnings timing | 5.0 |
| surprise avg | 0.0 |
| dividend safety | 6.0 |
- ▸Earnings concerns: 1B/3M
- ▸Earnings in 2 days
How the verdict was assembled
Engine trigger
Quality below minimum threshold.
Engine technical detail
verdict_path:
L1:HARD_BLOCK:QUALITY_FLOORPassed (5)
- MOMENTUM:5.5>=4.5
- INSIDER:OK
- NEWS_EVENTS:NONE_RECENT
- SEMI_CYCLE_PEAK:CLEAR
- MATERIALS_CYCLE_PEAK:CLEAR
Failed (2)
- ASYMMETRY:-0.5=NEGATIVE
- EARNINGS_PROXIMITY:2d<=7d
Warning (2)
- MOMENTUM:5.5<5.5 (soft — BUY_NOW allowed but watch)
- 8K_CSUITE_CHANGE:5.02 (officer departure/appointment)
Reward-to-Risk
-0.45
Upside
-3.2%
Downside
7.1%
Sizing output
AVOID
Setup— — No clear chart pattern; technical signals are mixed
EdgeNo clear edge — No clear edge identified
SuitabilityAggressive — Beta 1.36>1.3, MCap $4.9B<$5B
Investment implication
The SELL_IF_HOLDING verdict reflects the ASYMMETRY gate's -0.5=NEGATIVE outcome against Value at 7.5 and asymmetric R:R of -0.45.
The strongest dimensions are Value at 7.5, Insider at 7.3, and Technical at 6.7; the weakest are Growth at 2.9, Catalyst at 3.2, and Quality at 3.3. The V9 engine flagged 2 failed gates with 2 warnings, producing an asymmetric reward-to-risk of -0.45 and an engine sizing output of AVOID.
What would invalidate the thesis
Falsifying conditions — when triggered, the corresponding pillar's thesis is invalidated.
- P1Earnings Miss Streak Execution Risk
Trip ifActual EPS misses consensus estimate by more than 10% in any of the next 2 quarterly reports.
- P2Declining Revenue Value Trap Risk
Trip ifRevenue declines by more than 15% year-over-year in any reported quarter.
- P3Below Quality Floor
Trip ifFree cash flow as a percentage of net income falls below 20% in any reported quarter.
- P4Price Momentum Technical Recovery
Trip ifStock price drops below $67.60, the stop-loss level, on a closing basis.