Meritage Homes is the IBD Stock Of The Day as the homebuilder closes in a buy point after finding key technical support and flashing a key bullish signal. MTH stock is already actionable.
Meritage Homes builds single-family detached homes, mostly in the central and western U.S. It claims to set the standard for energy-efficient homes.
Homebuilder stocks are acting well as the housing market starts to recover, including KB Home, which jumped on strong earnings Thursday.
Sales of new U.S. single-family homes rose to a six-month high in February and have now increased for three straight months, data released Thursday showed. Analysts said that the housing market may be stabilizing, after a pounding from high mortgage rates.
On March 23, MTH stock joined the prestigious IBD Leaderboard list as it showed bullish technical action. The homebuilder boasts a strong earnings history.
Still, the stock market is in a correction. Investors should be cautious about making new purchases, but it's a good time to build watch lists.
IBD Live: A New Tool For Daily Stock Market Analysis
Meritage Homes: Strong IBD Ratings
The Stock Checkup tool shows that MTH stock earns a perfect IBD Composite Rating of 99, RS Rating of 96 and EPS Rating of 97, all out of a best-possible 99.
The 96 Relative Strength Rating means that MSCI stock has outperformed 96% of all stocks in IBD's database over the past year.
MTH Stock
Shares of the homebuilder rose 2% to 113.45 on the stock market today, gaining for the fourth straight day.
MTH stock is nearing a 117.32 buy point from a large cup-with-handle base. The handle qualifies as a flat base of its own.
The homebuilder stock found support at the 50-day/10-week moving average during the recent volatility, the MarketSmith chart shows.
The relative strength line for MTH stock has been striking fresh ahead of a possible breakout, a bullish technical sign. The RS line, the blue line in the chart provided, tracks the stock's performance vs. the S&P 500.
Investors could use Thursday's move as an early entry, clearing a downward-sloping trendline in the handle as well as clearing some short-term levels. Investors could use a decisive break of the 50-day line as a sell signal.
However, investors should be cautious about making buys in the current climate. Despite an ongoing rally attempt, the market is still in a correction.
The IBD Stock Of The Day's cup-with-handle base includes a 6.5% earnings pop Feb. 2.
MTH Earnings
The Scottsdale, Ariz.-based Meritage Homes boasts an enviable record of earnings growth. The homebuilder has seen its earnings vault from $3.41 a share in 2017 to $26.74 in 2022, growing at a robust pace despite the Covid-19 pandemic.
On a per-share basis, Meritage earnings jumped nearly 39% in 2022, following a 75% leap the prior year.
But earnings growth has slowed the past three quarters. The Street sees earnings plunging 52% in 2023, due in part to some tough year-over-year comparisons.
Sales are also seen tumbling 23% this year.
Analysts call for a nearly 8% earnings rebound in 2024 as sales bounce 4%. But both earnings and sales would still be far below 2022 levels.
Industry peers include KB Home, which soared 8% on earnings Thursday. KBH stock approached a breakout of its own.
Peers also include Toll Brothers, Lennar, PulteGroup and Taylor Morrison Home.
All those homebuilder stocks are broadly moving through late stages of valid bases, near buy points or early entries.
