Meritage Homes (NYSE:MTH) vs. Smith Douglas Homes (NYSE:SDHC) Critical Review

Meritage Homes (NYSE:MTH) and Smith Douglas Homes (NYSE:SDHC) are both construction companies, but which is the superior stock? We will contrast the two businesses based on the strength of their valuation, earnings, institutional ownership, profitability, risk, dividends and analyst recommendations.

Insider and Institutional Ownership

98.4% of Meritage Homes shares are held by institutional investors. 2.0% of Meritage Homes shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Earnings & Valuation

This table compares Meritage Homes and Smith Douglas Homes’ top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Meritage Homes	$6.14 billion	1.00	$738.75 million	$21.44	7.90
Smith Douglas Homes	$764.63 million	0.34	$123.18 million	N/A	N/A

Meritage Homes has higher revenue and earnings than Smith Douglas Homes.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Meritage Homes and Smith Douglas Homes, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Meritage Homes	1	3	3	0	2.29
Smith Douglas Homes	0	5	1	0	2.17

Meritage Homes currently has a consensus target price of $172.67, suggesting a potential upside of 1.88%. Smith Douglas Homes has a consensus target price of $27.70, suggesting a potential downside of 4.52%. Given Meritage Homes’ stronger consensus rating and higher possible upside, equities analysts clearly believe Meritage Homes is more favorable than Smith Douglas Homes.

Profitability

This table compares Meritage Homes and Smith Douglas Homes’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Meritage Homes	12.54%	17.63%	12.65%
Smith Douglas Homes	N/A	N/A	N/A

Summary

Meritage Homes beats Smith Douglas Homes on 11 of the 11 factors compared between the two stocks.

About Meritage Homes

Meritage Homes Corporation, together with its subsidiaries, designs and builds single-family attached and detached homes in the United States. The company operates through two segments, Homebuilding and Financial Services. It acquires and develops land; and constructs, markets, and sells homes for entry-level and first move-up buyers in Arizona, California, Colorado, Utah, Texas, Florida, Georgia, North Carolina, South Carolina, and Tennessee. The company also offers title and escrow, mortgage, insurance, and closing/settlement services to its homebuyers. Meritage Homes Corporation was founded in 1985 and is based in Scottsdale, Arizona.

About Smith Douglas Homes

Smith Douglas Homes Corp., together with its subsidiaries, engages in the design, construction, and sale of single-family homes in the southeastern United States. It also provides closing, escrow, and title insurance services. The company sells its products to entry-level and empty-nest homebuyers. Smith Douglas Homes Corp. was founded in 2008 and is headquartered in Woodstock, Georgia.