3 Reasons to Sell MTH and 1 Stock to Buy Instead

Meritage Homes has been treading water for the past six months, recording a small return of 3.8% while holding steady at $77.46. The stock also fell short of the S&P 500’s 11.4% gain during that period.

Meritage Homes has been treading water for the past six months, recording a small return of 3.8% while holding steady at $77.46. The stock also fell short of the S&P 500's 11.4% gain during that period. Is now the time to buy Meritage Homes, or should you be careful about including it in your portfolio?

Get the full stock story straight from our expert analysts, it's free. Why Do We Think Meritage Homes Will Underperform? We're swiping left on Meritage Homes for now.

Here are three reasons we avoid MTH, plus one stock we'd rather own. 1. Long-Term Revenue Growth Disappoints Examining a company's long-term performance can provide clues about its quality.

Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Meritage Homes grew its sales at a sluggish 3.7% compounded annual growth rate. This fell short of our benchmark for the industrials sector.

2. EPS Trending Down We track the long-term change in earnings per share (EPS) because it highlights whether a company's growth is profitable. Sadly for Meritage Homes, its EPS declined by 2.2% annually over the last five years while its revenue grew by 3.7%. This tells us the company became less profitable on a per-share basis as it expanded.

3. New Investments Fail to Bear Fruit as ROIC Declines A company's ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity). Unfortunately, Meritage Homes's ROIC has decreased significantly over the last few years.

We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities. Final Judgment Meritage Homes falls short of our quality standards. With its shares trailing the market in recent months, the stock trades at 14.1× forward P/E (or $77.46 per share).

While this valuation is fair, the upside isn't great compared to the potential downside. There are better investments elsewhere. We'd recommend looking at the Amazon and PayPal of Latin America.

Stocks We Would Buy Instead of Meritage Homes WHILE YOU'RE HERE: Top 9 Market-Beating Stocks. The best stocks don't just beat the market once. They do it again.

And again. Robust revenue growth, rising free cash flow, returns on capital that leave their competition in the dust. The market has already rewarded these businesses.

But our AI platform says the party isn't over. Find out which 9 stocks made the cut this week — FREE. Get Our Top 9 Market-Beating Stocks for Free HERE.

Stocks that have made our list include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.