Meritage Homes stock has fallen to $58.81 over the past six months, a drop that has eroded 11.4% of shareholder capital while the S&P 500 climbed by 12.8%. Analysts at StockStory argue that despite the lower entry price, the homebuilder does not currently offer a compelling investment opportunity due to deteriorating fundamental metrics.
The firm points to the company's backlog as a primary concern. Backlog represents the value of outstanding orders that have not yet been delivered, providing visibility into future revenue. In the latest quarter, Meritage Homes reported a backlog of $661.9 million. Over the last two years, this figure has declined by an average of 27.6% year-on-year. The analysts interpret this trend as evidence that the company is struggling to win new orders, potentially indicating increased competition or market saturation.
Profitability has also slipped as the company has expanded. Over the last five years, Meritage Homes' earnings per share (EPS) declined by 7.7% annually, even as revenue grew by 1.8%. This divergence suggests that the company became less profitable on a per-share basis during its period of growth. Additionally, return on invested capital (ROIC), a metric measuring operating profit relative to raised capital, has decreased significantly over the last few years. The analysts describe these declining returns as a symptom of fewer profitable growth opportunities.
With the recent stock price drawdown, Meritage Homes now trades at a forward price-to-earnings ratio of 11.8 times, or $58.81 per share. While StockStory acknowledges that this valuation is reasonable, the firm states it does not see a significant opportunity in the stock at this time. Instead, analysts recommend looking toward other investments, specifically citing top software and edge computing picks as preferred alternatives.
The report also highlights broader market trends, noting that major stock winners often share a common trait of rapid revenue growth before their price runs. The firm lists Meta, CrowdStrike, and Broadcom as examples of companies flagged by its AI for such growth, which returned 315%, 314%, and 455%, respectively. Other past list performers include Nvidia, which gained 1,460% between June 2020 and June 2025, and Comfort Systems, which rose 1,154% over the same period.