Is Meritage Homes Corp. overvalued or undervalued?

As of 13 August 2025, the valuation grade for Meritage Homes Corp. has moved from expensive to very expensive, indicating a significant deterioration in its valuation outlook. Based on the current metrics, the company appears to be overvalued. The P/E ratio stands at 6, which is notably lower than the peer average of approximately 9.15 for companies like Toll Brothers, Inc. (P/E of 11.10) and Taylor Morrison Home Corp. (P/E of 10.67). Additionally, the EV to EBITDA ratio is 6.04, which is also below the peer average, suggesting that the market may not be pricing in the company's potential effectively.
In terms of performance, Meritage Homes has underperformed relative to the S&P 500 across multiple time frames, with a one-year return of -24.39% compared to the S&P 500's 17.14%. This trend reinforces the notion that the stock may be overvalued, as it has not delivered returns commensurate with its current valuation metrics.