Validea's Top Consumer Discretionary Stocks Based On Benjamin Graham - 9/19/2024
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Sep 19 2024
0mins
Source: NASDAQ.COM
Top Rated Consumer Discretionary Stocks: Validea's Value Investor model, based on Benjamin Graham's strategy, identifies several mid-cap value stocks in the Consumer Discretionary sector, including Meritage Homes Corp, Asbury Automotive Group, Foot Locker Inc, and Century Communities Inc, all rated at 71% based on their fundamentals and valuations.
About Benjamin Graham and Validea: Benjamin Graham, known as the "Father of Value Investing," influenced many successful investors and developed a methodology that continues to guide investment strategies today, while Validea provides stock analysis and model portfolios based on the principles of renowned investors.
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Analyst Views on MTH
Wall Street analysts forecast MTH stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for MTH is 85.50 USD with a low forecast of 74.00 USD and a high forecast of 104.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
6 Analyst Rating
2 Buy
4 Hold
0 Sell
Moderate Buy
Current: 78.050
Low
74.00
Averages
85.50
High
104.00
Current: 78.050
Low
74.00
Averages
85.50
High
104.00
About MTH
Meritage Homes Corporation is a designer and builder of single-family attached and detached homes. The Company’s segments include homebuilding and financial services. The homebuilding segment is engaged in the business of acquiring and developing land, constructing homes, marketing and selling those homes and providing warranty and customer services. It has operations in three regions: West, Central and East, which are comprised of 12 states: Arizona, California, Colorado, Utah, Texas, Alabama, Florida, Georgia, Mississippi, North Carolina, South Carolina, and Tennessee. These three regions are its principal homebuilding segments. The financial services segment offers title and escrow, mortgage, and insurance services. Its financial services operations also provide mortgage services to its homebuyers through an unconsolidated joint venture. The Company’s homebuilding activities are conducted under the name of Meritage Homes in each of its homebuilding markets.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
U.S. Housing Shortage and Investment Opportunities
- Housing Shortage Reality: According to Goldman Sachs, the U.S. faces a shortage of 3 to 4 million homes, significantly exceeding the normal annual construction of 1.5 million, leading to fierce competition among buyers and rising prices, thus providing sustained market opportunities for major homebuilders.
- Growth Potential of LGI Homes: LGI Homes is projected to achieve an 11% sales growth this year and 6% next year, reaching $2 billion in sales by 2027, showcasing its ability to stand out in a competitive market, particularly among first-time homebuyers.
- Market Leadership of D.R. Horton: As the largest homebuilder in the U.S., D.R. Horton reported $34.3 billion in sales last year, with expectations to grow sales to nearly $40 billion in the coming years, and its reasonable 10x P/E ratio offers a compelling value proposition for investors.
- Income Model of Invitation Homes: Invitation Homes owns and manages over 100,000 homes, with projected sales growth of only 3%, but its 4.34% dividend yield significantly surpasses the market average, attracting more income-focused investors.
See More
UBS Lowers Target Price for Meritage Homes Corp to $95 from $101
Company Overview: Meritage Homes Corp is a homebuilding company that focuses on residential construction.
Stock Price Adjustment: The company has cut its target price from $101 to $95, indicating a reassessment of its market value.
See More
Meritage Homes Q4 2025 Earnings Call Insights
- Delivery Performance: Meritage Homes delivered 3,755 homes in Q4 2025, generating $1.4 billion in revenue, despite a 7% decline in delivery volume compared to the previous year, highlighting ongoing market demand challenges.
- Capital Allocation Strategy: The company strategically terminated certain land deals to redeploy capital, planning to buy back $400 million in shares in 2026, aiming to enhance long-term portfolio value creation.
- Financial Metrics: The adjusted gross margin for the fourth quarter was 19.3%, down from 23.3% a year ago, primarily impacted by $27.9 million in land deal termination charges and other nonrecurring expenses, indicating pressure on profitability.
- Future Outlook: The company expects 2026 closings to align with 2025 performance, with community count growth projected at 5% to 10%, while management remains optimistic about potential improvements in the spring selling season despite ongoing affordability challenges and market uncertainties.
See More
Meritage Homes Reports Q4 and Full Year 2025 Results
- Stable Sales Orders: Meritage Homes reported full-year sales orders of 14,650 homes for 2025, consistent with the previous year, demonstrating effective strategies in opening new communities and managing inventory despite market challenges.
- Significant Revenue Decline: The company recorded home closing revenue of $1.4 billion in Q4 2025, a 12% year-over-year decrease primarily due to lower closing volume and average sales prices, reflecting ongoing pressures in the affordable housing market.
- Gross Margin Decline: The home closing gross margin for Q4 2025 was 16.5%, down 670 basis points from the prior year, largely impacted by non-recurring charges and increased utilization of incentives, indicating challenges in cost control.
- Shareholder Return Strategy: In Q4 2025, Meritage repurchased 2.2 million shares for $150 million, emphasizing a focus on capital utilization in current market conditions, while planning to repurchase $400 million in shares in 2026 to address stock undervaluation.
See More
Meritage Homes Q4 Earnings Announcement Scheduled
- Earnings Release Date: Meritage Homes is set to announce its Q4 earnings on January 28 after market close, with a consensus EPS estimate of $1.52, reflecting a significant year-over-year decline of 67.8%, indicating pressure on profitability.
- Revenue Expectations Decline: The anticipated revenue for Q4 is $1.49 billion, down 6.9% year-over-year, which highlights the ongoing weakness in the housing market and reduced demand that could impact the company's overall financial performance.
- Historical Performance Review: Over the past year, Meritage Homes has beaten EPS estimates 75% of the time but only 50% of the time for revenue, showcasing volatility in its profitability metrics.
- Estimate Revision Situation: In the last three months, there have been no upward revisions for EPS estimates, with 8 downward revisions, and similarly, revenue estimates have seen no upward revisions and 7 downward revisions, indicating a weakening market confidence in the company's future performance.
See More
Meritage Homes Corp Analyzes Dividend History with 2.4% Annual Yield Expectation
- Dividend Yield Analysis: Meritage Homes Corp's latest dividend expectation stands at an annualized yield of 2.4%, closely tied to the company's profitability fluctuations, reflecting a cautiously optimistic market outlook on its future earnings.
- Volatility Assessment: With a trailing twelve-month volatility of 39% based on the last 251 trading days' closing prices, Meritage's stock exhibits significant price fluctuations, necessitating careful risk-reward evaluations by investors.
- Options Trading Dynamics: On Friday, the put volume among S&P 500 components reached 1.53 million contracts, while call volume hit 2.57 million, indicating a preference for call options among investors, which reflects a bullish market sentiment.
- Options Market Trends: The current put-to-call ratio of 0.59 is below the long-term median of 0.65, suggesting a positive outlook on Meritage's future performance, which may influence its stock price trajectory.
See More
U.S. Housing Shortage and Investment Opportunities
- Housing Shortage Reality: According to Goldman Sachs, the U.S. faces a shortage of 3 to 4 million homes, significantly exceeding the normal annual construction of 1.5 million, leading to fierce competition among buyers and rising prices, thus providing sustained market opportunities for major homebuilders.
- Growth Potential of LGI Homes: LGI Homes is projected to achieve an 11% sales growth this year and 6% next year, reaching $2 billion in sales by 2027, showcasing its ability to stand out in a competitive market, particularly among first-time homebuyers.
- Market Leadership of D.R. Horton: As the largest homebuilder in the U.S., D.R. Horton reported $34.3 billion in sales last year, with expectations to grow sales to nearly $40 billion in the coming years, and its reasonable 10x P/E ratio offers a compelling value proposition for investors.
- Income Model of Invitation Homes: Invitation Homes owns and manages over 100,000 homes, with projected sales growth of only 3%, but its 4.34% dividend yield significantly surpasses the market average, attracting more income-focused investors.
See More
UBS Lowers Target Price for Meritage Homes Corp to $95 from $101
Company Overview: Meritage Homes Corp is a homebuilding company that focuses on residential construction.
Stock Price Adjustment: The company has cut its target price from $101 to $95, indicating a reassessment of its market value.
See More
Meritage Homes Q4 2025 Earnings Call Insights
- Delivery Performance: Meritage Homes delivered 3,755 homes in Q4 2025, generating $1.4 billion in revenue, despite a 7% decline in delivery volume compared to the previous year, highlighting ongoing market demand challenges.
- Capital Allocation Strategy: The company strategically terminated certain land deals to redeploy capital, planning to buy back $400 million in shares in 2026, aiming to enhance long-term portfolio value creation.
- Financial Metrics: The adjusted gross margin for the fourth quarter was 19.3%, down from 23.3% a year ago, primarily impacted by $27.9 million in land deal termination charges and other nonrecurring expenses, indicating pressure on profitability.
- Future Outlook: The company expects 2026 closings to align with 2025 performance, with community count growth projected at 5% to 10%, while management remains optimistic about potential improvements in the spring selling season despite ongoing affordability challenges and market uncertainties.
See More
Meritage Homes Reports Q4 and Full Year 2025 Results
- Stable Sales Orders: Meritage Homes reported full-year sales orders of 14,650 homes for 2025, consistent with the previous year, demonstrating effective strategies in opening new communities and managing inventory despite market challenges.
- Significant Revenue Decline: The company recorded home closing revenue of $1.4 billion in Q4 2025, a 12% year-over-year decrease primarily due to lower closing volume and average sales prices, reflecting ongoing pressures in the affordable housing market.
- Gross Margin Decline: The home closing gross margin for Q4 2025 was 16.5%, down 670 basis points from the prior year, largely impacted by non-recurring charges and increased utilization of incentives, indicating challenges in cost control.
- Shareholder Return Strategy: In Q4 2025, Meritage repurchased 2.2 million shares for $150 million, emphasizing a focus on capital utilization in current market conditions, while planning to repurchase $400 million in shares in 2026 to address stock undervaluation.
See More
Meritage Homes Q4 Earnings Announcement Scheduled
- Earnings Release Date: Meritage Homes is set to announce its Q4 earnings on January 28 after market close, with a consensus EPS estimate of $1.52, reflecting a significant year-over-year decline of 67.8%, indicating pressure on profitability.
- Revenue Expectations Decline: The anticipated revenue for Q4 is $1.49 billion, down 6.9% year-over-year, which highlights the ongoing weakness in the housing market and reduced demand that could impact the company's overall financial performance.
- Historical Performance Review: Over the past year, Meritage Homes has beaten EPS estimates 75% of the time but only 50% of the time for revenue, showcasing volatility in its profitability metrics.
- Estimate Revision Situation: In the last three months, there have been no upward revisions for EPS estimates, with 8 downward revisions, and similarly, revenue estimates have seen no upward revisions and 7 downward revisions, indicating a weakening market confidence in the company's future performance.
See More
Meritage Homes Corp Analyzes Dividend History with 2.4% Annual Yield Expectation
- Dividend Yield Analysis: Meritage Homes Corp's latest dividend expectation stands at an annualized yield of 2.4%, closely tied to the company's profitability fluctuations, reflecting a cautiously optimistic market outlook on its future earnings.
- Volatility Assessment: With a trailing twelve-month volatility of 39% based on the last 251 trading days' closing prices, Meritage's stock exhibits significant price fluctuations, necessitating careful risk-reward evaluations by investors.
- Options Trading Dynamics: On Friday, the put volume among S&P 500 components reached 1.53 million contracts, while call volume hit 2.57 million, indicating a preference for call options among investors, which reflects a bullish market sentiment.
- Options Market Trends: The current put-to-call ratio of 0.59 is below the long-term median of 0.65, suggesting a positive outlook on Meritage's future performance, which may influence its stock price trajectory.
See More
