MTH
Meritage Homes Corporation
$64.23
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Undervalued
Trading 53.8% below fair value
You pay
$64.23
Bear
$104.89
Fair
$138.92
Bull
$172.96
Bear
$104.89
+63.3%
$9.97 × 14x + net cash
Fair
$138.92
+116.3%
$9.97 × 18x + net cash
Bull
$172.96
+169.3%
$9.97 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($9.97)
Implied Market Multiple
6.4x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $83.25 from 38 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $138.92 per share.
Warnings
Wall Street's average price target is $83.25 (from 38 analysts). Our estimate is 96% above the consensus -- consider that gap carefully.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing