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09-10-2023, 08:28 AM
Meritage (MTH) is a US home builder. It is a cyclical company with average fundamentals.
My last valuation of MTH was in Jun 2023 when it was trading at USD 138 per share.
![[Image: Meritage-2023.png]](https://i.postimg.cc/RhFjnpM6/Meritage-2023.png)
I valued MTH over the Housing Starts cycle as USD 142 to 163 per share based on various ways to calculate the gross profit margins. This is based on the view that there is no growth in the long-term annual average Housing Starts.
But if you assumed that there is a 1/3 increase in the long-term annual average Housing the value would be higher
But this price has now (8 Oct 2023) dropped to USD 115 per share. At this price, there is now a margin of safety. Do you wait for it to go down further?
For more insights into US companies, go to “Are these outstanding stocks - what to consider? (Other Stock Exchanges)”
- Its revenue from 2005 to 2022 was strongly correlated with Housing Starts. Any analysis, and valuation of MTH should be based on its performance over the cycle.
- I would rate MTH's performance and financial position as average. It had not been able to improve its gross profitability over the cycle.
My last valuation of MTH was in Jun 2023 when it was trading at USD 138 per share.
I valued MTH over the Housing Starts cycle as USD 142 to 163 per share based on various ways to calculate the gross profit margins. This is based on the view that there is no growth in the long-term annual average Housing Starts.
But if you assumed that there is a 1/3 increase in the long-term annual average Housing the value would be higher
But this price has now (8 Oct 2023) dropped to USD 115 per share. At this price, there is now a margin of safety. Do you wait for it to go down further?
For more insights into US companies, go to “Are these outstanding stocks - what to consider? (Other Stock Exchanges)”