Meritage Homes Corporation (NYSE:MTH), might not be a large cap stock, but it led the NYSE gainers with a relatively large price hike in the past couple of weeks. The company is inching closer to its yearly highs following the recent share price climb. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company's outlook is already priced into the stock. However, what if the stock is still a bargain? Let's examine Meritage Homes's valuation and outlook in more detail to determine if there's still a bargain opportunity.

View our latest analysis for Meritage Homes

What's The Opportunity In Meritage Homes?

Good news, investors! Meritage Homes is still a bargain right now according to our price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, we've used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock's cash flows. we find that Meritage Homes's ratio of 7.52x is below its peer average of 11.1x, which indicates the stock is trading at a lower price compared to the Consumer Durables industry. What's more interesting is that, Meritage Homes's share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from Meritage Homes?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let's also take a look at the company's future expectations. However, with a negative profit growth of -11% expected over the next couple of years, near-term growth certainly doesn't appear to be a driver for a buy decision for Meritage Homes. This certainty tips the risk-return scale towards higher risk.

What This Means For You

Are you a shareholder? Although MTH is currently trading below the industry PE ratio, the adverse prospect of negative growth brings about some degree of risk. We recommend you think about whether you want to increase your portfolio exposure to MTH, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you've been keeping an eye on MTH for a while, but hesitant on making the leap, we recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you want to dive deeper into Meritage Homes, you'd also look into what risks it is currently facing. To that end, you should learn about the 2 warning signs we've spotted with Meritage Homes (including 1 which is a bit concerning).

If you are no longer interested in Meritage Homes, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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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.