MTH
Meritage Homes Corporation
$75.50
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Undervalued
Trading 46.0% below fair value
You pay
$75.50
Bear
$105.58
Fair
$139.84
Bull
$174.11
Bear
$105.58
+39.8%
$9.97 × 14x + net cash
Fair
$139.84
+85.2%
$9.97 × 18x + net cash
Bull
$174.11
+130.6%
$9.97 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($9.97)
Implied Market Multiple
7.6x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $86.33 from 38 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $139.84 per share.
Warnings
Wall Street's average price target is $86.33 (from 38 analysts). Our estimate is 89% 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