KB Home Or Meritage Homes: Which Is A Better Investment Pick?
Zacks Investment Research | Aug 27, 2019 10:46PM ET
Despite global economic slowdown and rising land and labor costs, the U.S. housing industry is expected to perform well on the back of the Federal Reserve’s dovish stance and declining mortgage rates. Rising wages and lower unemployment level are also adding to the bliss.
The latest sales data of new and existing homes signaled the positives surrounding the industry. Both the metrics were up year over year in the month of July. Notable homebuilders like KB Home (NYSE:KBH) , Meritage Homes Corporation (NYSE:MTH) , PulteGroup, Inc. (NYSE:PHM) and Toll Brothers, Inc. (NYSE:TOL) remain positive, as these have been experiencing steady demand for single-family homes.
Let’s delve deeper into both the company’s growth and profitability measures.
How the Companies are Poised
KB Home — with a market cap of $2.48 billion — offers a diverse range of new homes that are designed primarily for first time, move-up and active adult homebuyers on acquired or developed lands. It also builds attached and detached single-family and town homes, as well as condominiums.
The company has been benefiting from Built-to-Order approach and Returns-Focused Growth Plan. With these initiatives, it emphasizes on core business strategy, improving asset efficiency and monetizing significant deferred tax assets that further help it gain a competitive edge over its peers and reduce costs. Not only its customer-centric approach is encouraging, but also aggressive investment in land acquisition and development is poised to drive growth. It has invested more than $6 billion in land acquisition and development since 2015, and plans to invest more going forward.
On the contrary, Meritage Homes — having a market cap of $2.49 billion — engages in building and selling single-family homes for entry-level, first-time and move-up buyers in historically high-growth regions of the United States. The company’s successful execution of strategic initiatives to boost profitability and focus on entry-level LiVE.NOW homes — which address the need for lower-priced homes — is expected to yield higher absorptions, aided by an improving community count growth trajectory in 2019.
The leading designer and builder of single-family homes provides financing and related services to customers through the financial services segment.
Stock Performance
KB Home has gained 45.8% so far this year and Meritage Homes’ shares have increased 74.6% compared with Zacks Investment Research
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