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Meritage Homes Corporation (NYSE:MTH)
Piotroski F-Score
4 (As of Today)

The zones of discrimination were as such:

Good or high score = 8 or 9
Bad or low score = 0 or 1

Meritage Homes Corporation has an F-score of 4 indicating the company's financial situation is typical for a stable company.

MTH' s 10-Year Piotroski F-Score Range
Min: 1   Max: 7
Current: 4

1
7

During the past 13 years, the highest Piotroski F-Score of Meritage Homes Corporation was 7. The lowest was 1. And the median was 5.


Definition

How is the Piotroski F-Score calculated?

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Dec13) TTM:Last Year (Dec12) TTM:
Net Income was 46.089 + 38.191 + 28.143 + 12.041 = $124 Mil.
Cash Flow from Operations was -46.75 + -20.005 + -19.402 + -0.119 = $-86 Mil.
Revenue was 541.67 + 497.275 + 454.87 + 340.064 = $1,834 Mil.
Gross Profit was 128.088 + 117.476 + 99.217 + 67.591 = $412 Mil.
Total Assets at the begining of this year (Dec12) was $1,576 Mil.
Total Assets was $2,003 Mil.
Long-Term Debt was $905 Mil.
Total Current Assets was $403 Mil.
Total Current Liabilities was $235 Mil.
Net Income was 95.128 + 6.784 + 8.005 + -4.754 = $105 Mil.

Revenue was 368.595 + 345.945 + 284.414 + 205.956 = $1,205 Mil.
Gross Profit was 72.485 + 65.409 + 53.743 + 36.817 = $228 Mil.
Total Assets at the begining of last year (Dec11) was $1,221 Mil.
Total Assets was $1,576 Mil.
Long-Term Debt was $723 Mil.
Total Current Assets was $316 Mil.
Total Current Liabilities was $146 Mil.

Profitability

Q1. Return on Assets (ROA)

Net income before extraordinary items for the year divided by total assets at the beginning of the year.

Score 1 if positive, 0 if negative.

Meritage Homes Corporation's current net income was 124. ==> Positive ==> Score 1.

Q2. Cash Flow Return on Assets (CFROA)

Net cash flow from operating activities (operating cash flow) divided by total assets at the beginning of the year.

Score 1 if positive, 0 if negative.

Meritage Homes Corporation's current cash flow from operations was -86. ==> Negative ==> Score 0.

Q3. Change in Return on Assets

Compare this year’s return on assets (1) to last year’s return on assets.

Score 1 if it’s higher, 0 if it’s lower.

ROA (This Year)=Net Income/Total Assets at the beginning of this year (Dec12)
=124.464/1575.562
=0.07899657

ROA (Last Year)=Net Income/Total Assets at the beginning of last year (Dec11)
=105.163/1221.378
=0.08610193

Meritage Homes Corporation's return on assets of this year was 0.07899657. Meritage Homes Corporation's return on assets of last year was 0.08610193. ==> Last year is higher ==> Score 0.

Q4. Quality of Earnings (Accrual)

Compare Cash flow return on assets (2) to return on assets (1)

Score 1 if CFROA > ROA, 0 if CFROA =< ROA.

Meritage Homes Corporation's current net income was 124. Meritage Homes Corporation's current cash flow from operations was -86. ==> -86 =< 124 ==> CFROA =< ROA ==> Score 0.

Funding

Q5. Change in Gearing or Leverage

Compare this year’s gearing (long-term debt divided by average total assets) to last year’s gearing.

Score 1 if gearing is lower, 0 if it’s higher.

Gearing (This Year)=Long-Term Debt/Total Assets
=905.055/2003.361
=0.4517683

Gearing (Last Year)=Long-Term Debt/Total Assets
=722.797/1575.562
=0.45875503

Meritage Homes Corporation's gearing of this year was 0.4517683. Meritage Homes Corporation's gearing of last year was 0.45875503. ==> This year is lower. ==> Score 1.

Q6. Change in Working Capital (Liquidity)

Compare this year’s current ratio (current assets divided by current liabilities) to last year’s current ratio.

Score 1 if this year’s current ratio is higher, 0 if it’s lower

Current Ratio (This Year)=Total Current Assets/Total Current Liabilities
=402.806/234.629
=1.7167784

Current Ratio (Last Year)=Total Current Assets/Total Current Liabilities
=315.759/146.178
=2.16009933

Meritage Homes Corporation's current ratio of this year was 1.7167784. Meritage Homes Corporation's current ratio of last year was 2.16009933. ==> Last year's current ratio is higher ==> Score 0.

Q7. Change in Shares in Issue

Compare the number of shares in issue this year, to the number in issue last year.

Score 1 if there is fewer number of shares in issue this year. Score 0 otherwise.

Meritage Homes Corporation's number of shares in issue this year was 38.9. Meritage Homes Corporation's number of shares in issue last year was 38.7. ==> There is more number of shares in issue this year. ==> Score 0.

Efficiency

Q8. Change in Gross Margin

Compare this year’s gross margin (gross profit divided by sales) to last year’s.

Score 1 if this year’s gross margin is higher, 0 if it’s lower.

Gross Margin (This Year)=Gross Profit/Revenue
=412.372/1833.879
=0.22486325

Gross Margin (Last Year)=Gross Profit/Revenue
=228.454/1204.91
=0.18960254

Meritage Homes Corporation's gross margin of this year was 0.22486325. Meritage Homes Corporation's gross margin of last year was 0.18960254. ==> This year's gross margin is higher. ==> Score 1.

Q9. Change in asset turnover

Compare this year’s asset turnover (total sales divided by total assets at the beginning of the year) to last year’s asset turnover ratio.

Score 1 if this year’s asset turnover ratio is higher, 0 if it’s lower

Asset Turnover (This Year)=Revenue/Total Assets at the beginning of this year (Dec12)
=1833.879/1575.562
=1.16395229

Asset Turnover (Last Year)=Revenue/Total Assets at the beginning of last year (Dec11)
=1204.91/1221.378
=0.98651687

Meritage Homes Corporation's asset turnover of this year was 1.16395229. Meritage Homes Corporation's asset turnover of last year was 0.98651687. ==> This year's asset turnover is higher. ==> Score 1.

Evaluation

Piotroski F-Score=Q1+Q2+Q3+Q4+Q5+Q6+Q7+Q8+Q9
=1+0+0+0+1+0+0+1+1
=4

Good or high score = 8 or 9

Bad or low score = 0 or 1

Meritage Homes Corporation has an F-score of 4 indicating the company's financial situation is typical for a stable company.


Explanation

The developer of the system is Joseph D. Piotroski is relatively unknown accounting professor who shuns publicity and rarely gives interviews.

He graduated from the University of Illinois with a B.S. in accounting in 1989, received an M.B.A. from Indiana University in 1994. Five years later, in 1999, after earning a Ph.D. in accounting from the University of Michigan, he became an associate professor of accounting at the University of Chicago.

In 2000, he wrote a research paper called "Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers" (pdf).

He wanted to see if he can develop a system (using a simple nine-point scoring system) that can increase the returns of a strategy of investing in low price to book (referred to in the paper as high book to market) value companies.

What he found was something that exceeded his most optimistic expectations.

Buying only those companies that scored highest (8 or 9) on his nine-point scale, or F-Score as he called it, over the 20 year period from 1976 to 1996 led to an average out-performance over the market of 13.4%.

Even more impressive were the results of a strategy of investing in the highest F-Score companies (8 or 9) and shorting companies with the lowest F-Score (0 or 1).

Over the same period from 1976 to 1996 (20 years) this strategy led to an average yearly return of 23%, substantially outperforming the average S&P 500 index return of 15.83% over the same period.


Related Terms

Net Income, Cash Flow from Operations, Revenue, Gross Profit, Total Assets, Long-Term Debt, Total Current Assets, Total Current Liabilities


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Meritage Homes Corporation Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Q1 1110001011
Q2 1100111000
Q3 1100011010
Q4 0001111000
Q5 0100000011
Q6 1011111000
Q7 0011000000
Q8 1100011011
Q9 1100001011
F-score 6633357054

Meritage Homes Corporation Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
Q1 0000011111
Q2 0000000000
Q3 0000111110
Q4 0000000000
Q5 0001111111
Q6 0000001100
Q7 0100000000
Q8 1000111111
Q9 0001111111
F-score 1102456654
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