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GuruFocus has detected 2 Warning Signs with Meritage Homes Corp $MTH.
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Meritage Homes Corp (NYSE:MTH)
Piotroski F-Score
4 (As of Today)

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 4 indicating the company's financial situation is typical for a stable company.

MTH' s Piotroski F-Score Range Over the Past 10 Years
Min: 2   Max: 7
Current: 4

2
7

During the past 13 years, the highest Piotroski F-Score of Meritage Homes Corp was 7. The lowest was 2. 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 local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Net Income was 20.969 + 39.878 + 36.887 + 51.807 = $150 Mil.
Cash Flow from Operations was -81.817 + -28.802 + -37.726 + 44.943 = $-103 Mil.
Revenue was 597.766 + 805.167 + 760.211 + 860.791 = $3,024 Mil.
Gross Profit was 103.796 + 143.867 + 137.83 + 136.086 = $522 Mil.
Average Total Assets from the begining of this year (Dec15)
to the end of this year (Dec16) was
(2679.777 + 2714.513 + 2761.155 + 2873.155 + 2888.691) / 5 = $2783.4582 Mil.
Total Assets at the begining of this year (Dec15) was $2,680 Mil.
Long-Term Debt was $1,127 Mil.
Total Current Assets was $202 Mil.
Total Current Liabilities was $312 Mil.
Net Income was 16.4 + 29.133 + 30.308 + 52.897 = $129 Mil.

Revenue was 518.712 + 603.299 + 676.81 + 764.182 = $2,563 Mil.
Gross Profit was 95.641 + 118.885 + 131.845 + 133.355 = $480 Mil.
Average Total Assets from the begining of last year (Dec14)
to the end of last year (Dec15) was
(2316.138 + 2366.458 + 2586.669 + 2663.886 + 2679.777) / 5 = $2522.5856 Mil.
Total Assets at the begining of last year (Dec14) was $2,316 Mil.
Long-Term Debt was $1,117 Mil.
Total Current Assets was $320 Mil.
Total Current Liabilities was $268 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 150. ==> 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 -103. ==> 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 (Dec15)
=149.541/2679.777
=0.05580352

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=128.738/2316.138
=0.05558304

Meritage Homes Corp's return on assets of this year was 0.05580352. Meritage Homes Corp's return on assets of last year was 0.05558304. ==> This year is higher. ==> Score 1.

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 150. Meritage Homes Corp's current cash flow from operations (TTM) was -103. ==> -103 <= 150 ==> 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: Dec16)=Long-Term Debt/Average Total Assets from Dec15 to Dec16
=1127.314/2783.4582
=0.40500482

Gearing (Last Year: Dec15)=Long-Term Debt/Average Total Assets from Dec14 to Dec15
=1117.04/2522.5856
=0.4428155

Meritage Homes Corp's gearing of this year was 0.40500482. Meritage Homes Corp's gearing of last year was 0.4428155. ==> This year is lower or equal to last year. ==> Score 1.

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: Dec16)=Total Current Assets/Total Current Liabilities
=202.057/311.534
=0.64858731

Current Ratio (Last Year: Dec15)=Total Current Assets/Total Current Liabilities
=319.504/267.603
=1.19394775

Meritage Homes Corp's current ratio of this year was 0.64858731. Meritage Homes Corp's current ratio of last year was 1.19394775. ==> Last year's current ratio is higher ==> Score 0.

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 42.6. Meritage Homes Corp's number of shares in issue last year was 42.2. ==> 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
=521.579/3023.935
=0.17248354

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=479.726/2563.003
=0.18717341

Meritage Homes Corp's gross margin of this year was 0.17248354. Meritage Homes Corp's gross margin of last year was 0.18717341. ==> 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 (Dec15)
=3023.935/2679.777
=1.12842785

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=2563.003/2316.138
=1.10658475

Meritage Homes Corp's asset turnover of this year was 1.12842785. Meritage Homes Corp's asset turnover of last year was 1.10658475. ==> 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+1+0+1+0+0+0+1
=4

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

Meritage Homes Corp 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 local exchange's currency.

Meritage Homes Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Question 1 0001011111
Question 2 0111000000
Question 3 0011010001
Question 4 1111000000
Question 5 0000001101
Question 6 1111000010
Question 7 1000000000
Question 8 0011011000
Question 9 0001011011
F-score 3357044234

Meritage Homes Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Question 1 1111111111
Question 2 0000000000
Question 3 0000000011
Question 4 0000000000
Question 5 1110000111
Question 6 0000111000
Question 7 0000000000
Question 8 1000000000
Question 9 0000111111
F-score 3221333344
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