Is Meritage Homes Corp. overvalued or undervalued?

As of 17 October 2025, the valuation grade for Meritage Homes Corp. has moved from fair to expensive, indicating a shift towards overvaluation. The company appears overvalued based on its current metrics, including a P/E ratio of 6, which is significantly lower than the peer average of 9.16 for similar companies. Additionally, the EV to EBITDA ratio stands at 6.04, while peers like Toll Brothers, Inc. and Taylor Morrison Home Corp. have ratios of 9.45 and 8.98, respectively, suggesting that Meritage Homes is not only lagging behind its competitors but also priced higher relative to its earnings potential.
Despite a strong dividend yield of 90.31% and a respectable ROCE of 14.51%, the overall valuation metrics indicate that the stock is not justified at its current price of 70.14. Recent performance shows that while the company outperformed the S&P 500 over the last three years with a return of 101.64% compared to 81.19%, it has significantly underperformed in the past year with a decline of 30.53% against the S&P 500's 14.08%. This further reinforces the notion that Meritage Homes Corp. is currently overvalued.