MTH

Bull of the Day: Meritage Homes (MTH)

Meritage Homes Corp. (MTH) is perfectly situated to take advantage of the Millennial home buying rush. This Zacks Rank #1 (Strong Buy) is expected to grow its revenue by the double digits in both 2020 and 2021.

Meritage is the 7th largest public homebuilder in the United States. It has 300 communities across 9 states including Arizona, California, Colorado, Texas, Florida, Georgia, North Carolina, South Carolina and Tennessee.

It focuses on first-time and first move-up buyers.

Unprecedented Demand in July and August

On Sep 21, Meritage put out a business update on its first two months of the third quarter which included July and August.

It saw “unprecedented demand” in those two months and already sold more in just 2 months than it sold in the entire third quarter of last year.

Meritage also saw the strong demand continue into September.

In July and August, total orders jumped 73% year-over-year to 2,675 homes, up from 1,549 homes in the same period a year ago.

Average absorptions for those 2 months nearly doubled over the prior year to about 6 homes per month per community, net of 13% order cancellations in 2020 and 17% in 2019.

The company expects to close out some of its communities in late 2020 and early 2021 due to the strong demand so it’s on the hunt for new land positions so it can continue to grow its community count in 2021.

Meritage expected to put a record number of new lots under control in the third quarter, possibly more than 9,000 in total.

For the first 3 quarters, that would be 17,000 lots, which is close to the total number of lots it acquired in all of 2019 and is 70% more than 2018’s 10,000 lots.

Like all the homebuilders right now, Meritage has pricing

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Here’s Why Meritage Homes (MTH) is a Great Momentum Stock to Buy

Momentum investing is all about the idea of following a stock’s recent trend, which can be in either direction. In the ‘long’ context, investors will essentially be “buying high, but hoping to sell even higher.” And for investors following this methodology, taking advantage of trends in a stock’s price is key; once a stock establishes a course, it is more than likely to continue moving in that direction. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.

While many investors like to look for momentum in stocks, this can be very tough to define. There is a lot of debate surrounding which metrics are the best to focus on and which are poor quality indicators of future performance. The Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us.

Below, we take a look at Meritage Homes (MTH), which currently has a Momentum Style Score of A. We also discuss some of the main drivers of the Momentum Style Score, like price change and earnings estimate revisions.

It’s also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Meritage Homes currently has a Zacks Rank of #1 (Strong Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.

You can see the current list of Zacks #1 Rank Stocks here >>>

Set to Beat the Market?

Let’s discuss some of the components of the Momentum Style Score for MTH that show why this homebuilder shows promise as a solid momentum pick.

Looking at a stock’s short-term

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