Yahoo Finance Meritage Homes (NYSE:MTH) stock performs better than its underlying earnings growth over last five years
The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, you can make far more than 100% on a really good stock. One great example is Meritage Homes Corporation (NYSE:MTH) which saw its share price drive 118% higher over five years. It's also good to see the share price up 39% over the last quarter.
Since it's been a strong week for Meritage Homes shareholders, let's have a look at trend of the longer term fundamentals.
Check out our latest analysis for Meritage Homes
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, Meritage Homes achieved compound earnings per share (EPS) growth of 46% per year. This EPS growth is higher than the 17% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 4.03 also suggests market apprehension.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Meritage Homes has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Meritage Homes' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's good to see that Meritage Homes has rewarded shareholders with a total shareholder return of 6.6% in the last twelve months. Having said that, the five-year TSR of 17% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Meritage Homes that you should be aware of before investing here.
Of course Meritage Homes may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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