New Home (NWHM) & Meritage Homes (MTH) Head to Head Review

New Home (NYSE: NWHM) and Meritage Homes (NYSE:MTH) are both small-cap construction companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, dividends, analyst recommendations, risk, profitability, valuation and earnings.

Risk and Volatility

New Home has a beta of 1.63, meaning that its stock price is 63% more volatile than the S&P 500. Comparatively, Meritage Homes has a beta of 1.19, meaning that its stock price is 19% more volatile than the S&P 500.

Earnings & Valuation

This table compares New Home and Meritage Homes’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
New Home $751.17 million 0.28 $17.15 million $0.97 10.43
Meritage Homes $3.23 billion 0.56 $143.25 million $3.88 11.55

Meritage Homes has higher revenue and earnings than New Home. New Home is trading at a lower price-to-earnings ratio than Meritage Homes, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares New Home and Meritage Homes’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
New Home 2.09% 7.69% 3.09%
Meritage Homes 4.96% 11.76% 5.63%

Institutional and Insider Ownership

54.0% of New Home shares are held by institutional investors. Comparatively, 96.9% of Meritage Homes shares are held by institutional investors. 24.6% of New Home shares are held by insiders. Comparatively, 5.6% of Meritage Homes shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Analyst Ratings

This is a summary of recent recommendations and price targets for New Home and Meritage Homes, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
New Home 0 2 0 0 2.00
Meritage Homes 0 5 6 0 2.55

New Home presently has a consensus target price of $13.00, suggesting a potential upside of 28.46%. Meritage Homes has a consensus target price of $51.70, suggesting a potential upside of 15.40%. Given New Home’s higher probable upside, equities analysts clearly believe New Home is more favorable than Meritage Homes.

Summary

Meritage Homes beats New Home on 11 of the 14 factors compared between the two stocks.

About New Home

The New Home Company Inc. is a homebuilding company. The Company focuses on the design, construction and sale of consumer-driven homes in various metropolitan areas within certain markets in California and Arizona, including coastal Southern California, the San Francisco Bay area, metro Sacramento and the greater Phoenix area. The Company’s segments include homebuilding and fee building. The homebuilding operations consist of divisions in Northern California, Southern California and its division in Arizona, which is established through the purchase of lots in an unconsolidated joint venture. The Company is focused on building and selling homes for its own account. It is focused on identifying sites and creating communities that allow it to design, construct and sell consumer-driven single-family detached and attached homes in major metropolitan areas in coastal Southern California, the San Francisco Bay area, metro Sacramento and the greater Phoenix area.

About Meritage Homes

Meritage Homes Corporation designs and builds single-family homes in the United States. The company operates through two segments, Homebuilding and Financial Services. It acquires and develops land; and constructs, markets, and sells homes for various homebuyers, including first-time, move-up, active-adult, and luxury homes under the Meritage Homes brand name. The company also provides warranty and customer services; and insurance and closing/settlement services for its homebuyers. It builds and sells homes in Texas, Arizona, California, Colorado, Florida, North Carolina, South Carolina, Georgia, and Tennessee. Meritage Homes Corporation was founded in 1985 and is based in Scottsdale, Arizona.

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