MTH

Meritage Homes is a financially conservative, affordability-focused homebuilder going through a clear cyclical earnings trough, and the valuation already reflects the downturn. FY2025 net income fell 42.4% to $453M and diluted EPS dropped 40.8% to $6.35, yet at $75.73 the stock trades at just 11.9x earnings. The decline is cyclical, not structural: home closing revenue of $5.8 billion was down 9.1% from $6.3 billion on 3.7% fewer closings (15,026 vs 15,611) and a 5.6% lower ASP, while home closing gross margin compressed to 19.7% from 24.9% on heavier financing incentives, higher lot costs and weaker fixed-cost leverage. Management also absorbed one-time hits — $39.4 million of terminated land-contract charges, $16.5 million of real-estate impairments and severance — so adjusted gross margin was a firmer 20.8%.

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