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Meritage Homes Corp (NYSE:MTH)
Piotroski F-Score
3 (As of Today)

Warning Sign:

Piotroski F-Score of 3 is low, which usually implies poor business operation.

The zones of discrimination were as such:

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Meritage Homes Corp has an F-score of 3. It is a bad or low score, which usually implies poor business operation.

MTH' s Piotroski F-Score Range Over the Past 10 Years
Min: 1   Max: 8
Current: 3

1
8

During the past 13 years, the highest Piotroski F-Score of Meritage Homes Corp was 8. The lowest was 1. And the median was 4.


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 (Sep15) TTM:Last Year (Sep14) TTM:
Net Income was 49.208 + 16.4 + 29.133 + 30.308 = $125 Mil.
Cash Flow from Operations was 18.381 + -38.191 + -38.757 + 23.702 = $-35 Mil.
Revenue was 705.528 + 523.791 + 603.299 + 676.81 = $2,509 Mil.
Gross Profit was 145.523 + 99.421 + 118.885 + 131.845 = $496 Mil.
Average Total Assets from the begining of this year (Sep14)
to the end of this year (Sep15) was
(2272.812 + 2316.138 + 2366.458 + 2586.669 + 2663.886) / 5 = $2441.1926 Mil.
Total Assets at the begining of this year (Sep14) was $2,273 Mil.
Long-Term Debt was $1,146 Mil.
Total Current Assets was $295 Mil.
Total Current Liabilities was $276 Mil.
Net Income was 46.089 + 25.377 + 35.079 + 32.577 = $139 Mil.

Revenue was 541.67 + 412.445 + 510.352 + 562.308 = $2,027 Mil.
Gross Profit was 128.088 + 94.597 + 113.62 + 115.055 = $451 Mil.
Average Total Assets from the begining of last year (Sep13)
to the end of last year (Sep14) was
(1874.086 + 2003.361 + 2129.353 + 2192.678 + 2272.812) / 5 = $2094.458 Mil.
Total Assets at the begining of last year (Sep13) was $1,874 Mil.
Long-Term Debt was $905 Mil.
Total Current Assets was $150 Mil.
Total Current Liabilities was $274 Mil.

Profitability

Question 1. 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 Corp's current net income (TTM) was 125. ==> Positive ==> Score 1.

Question 2. 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 Corp's current cash flow from operations (TTM) was -35. ==> Negative ==> Score 0.

Question 3. 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 (TTM)/Total Assets at the Beginning of This Year (Sep14)
=125.049/2272.812
=0.05501951

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Sep13)
=139.122/1874.086
=0.07423459

Meritage Homes Corp's return on assets of this year was 0.05501951. Meritage Homes Corp's return on assets of last year was 0.07423459. ==> Last year is higher ==> Score 0.

Question 4. 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 Corp's current net income (TTM) was 125. Meritage Homes Corp's current cash flow from operations (TTM) was -35. ==> -35 <= 125 ==> CFROA <= ROA ==> Score 0.

Funding

Question 5. Change in Gearing or Leverage

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

Score 0 if this year's gearing is higher, 1 otherwise.

Gearing (This Year: Sep15)=Long-Term Debt/Average Total Assets from Sep14 to Sep15
=1145.958/2441.1926
=0.46942548

Gearing (Last Year: Sep14)=Long-Term Debt/Average Total Assets from Sep13 to Sep14
=904.629/2094.458
=0.43191556

Meritage Homes Corp's gearing of this year was 0.46942548. Meritage Homes Corp's gearing of last year was 0.43191556. ==> Last year is lower than this year ==> Score 0.

Question 6. 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: Sep15)=Total Current Assets/Total Current Liabilities
=295.026/275.672
=1.07020662

Current Ratio (Last Year: Sep14)=Total Current Assets/Total Current Liabilities
=150.14/273.652
=0.54865303

Meritage Homes Corp's current ratio of this year was 1.07020662. Meritage Homes Corp's current ratio of last year was 0.54865303. ==> This year's current ratio is higher. ==> Score 1.

Question 7. Change in Shares in Issue

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

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

Meritage Homes Corp's number of shares in issue this year was 42.2. Meritage Homes Corp's number of shares in issue last year was 41.7. ==> There is larger number of shares in issue this year. ==> Score 0.

Efficiency

Question 8. 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: TTM)=Gross Profit/Revenue
=495.674/2509.428
=0.19752469

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=451.36/2026.775
=0.22269862

Meritage Homes Corp's gross margin of this year was 0.19752469. Meritage Homes Corp's gross margin of last year was 0.22269862. ==> Last year's gross margin is higher ==> Score 0.

Question 9. Change in asset turnover

Compare this year’s asset turnover (total sales for the year 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 (TTM)/Total Assets at the Beginning of This Year (Sep14)
=2509.428/2272.812
=1.10410716

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Sep13)
=2026.775/1874.086
=1.08147385

Meritage Homes Corp's asset turnover of this year was 1.10410716. Meritage Homes Corp's asset turnover of last year was 1.08147385. ==> This year's asset turnover is higher. ==> Score 1.

Evaluation

Piotroski F-Score= Que. 1+ Que. 2+ Que. 3+Que. 4+Que. 5+Que. 6+Que. 7+Que. 8+Que. 9
=1+0+0+0+0+1+0+0+1
=3

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Meritage Homes Corp has an F-score of 3. It is a bad or low score, which usually implies poor business operation.


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 Corp Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
Question 1 1000101111
Question 2 0011100000
Question 3 0001101000
Question 4 0111100000
Question 5 1000000110
Question 6 1111100001
Question 7 1100000000
Question 8 0001101100
Question 9 0000101101
F-score 4335704423

Meritage Homes Corp Quarterly Data

Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15
Question 1 1111111111
Question 2 0000000000
Question 3 1000000000
Question 4 0000000000
Question 5 1111111000
Question 6 0000000011
Question 7 0000000000
Question 8 1111100000
Question 9 1100001011
F-score 5433323133
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