Head-To-Head Contrast: Meritage Homes (NYSE:MTH) versus Leggett & Platt (NYSE:LEG)

Meritage Homes (NYSE:MTH) and Leggett & Platt (NYSE:LEG) are both consumer discretionary companies, but which is the better business? We will compare the two companies based on the strength of their institutional ownership, profitability, analyst recommendations, valuation, earnings, risk and dividends.

Institutional & Insider Ownership

98.4% of Meritage Homes shares are owned by institutional investors. Comparatively, 64.2% of Leggett & Platt shares are owned by institutional investors. 2.5% of Meritage Homes shares are owned by company insiders. Comparatively, 2.4% of Leggett & Platt shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Meritage Homes and Leggett & Platt’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Meritage Homes	6.11%	7.13%	4.83%
Leggett & Platt	5.64%	13.31%	3.86%

Valuation & Earnings

This table compares Meritage Homes and Leggett & Platt”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Meritage Homes	$5.86 billion	0.71	$453.01 million	$4.78	13.37
Leggett & Platt	$3.89 billion	0.32	$235.40 million	$1.56	5.90

Meritage Homes has higher revenue and earnings than Leggett & Platt. Leggett & Platt is trading at a lower price-to-earnings ratio than Meritage Homes, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and price targets for Meritage Homes and Leggett & Platt, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Meritage Homes	0	8	4	0	2.33
Leggett & Platt	0	4	0	1	2.40

Meritage Homes currently has a consensus price target of $78.25, indicating a potential upside of 22.47%. Leggett & Platt has a consensus price target of $10.67, indicating a potential upside of 15.94%. Given Meritage Homes’ higher possible upside, analysts clearly believe Meritage Homes is more favorable than Leggett & Platt.

Risk and Volatility

Meritage Homes has a beta of 1.35, indicating that its share price is 35% more volatile than the S&P 500. Comparatively, Leggett & Platt has a beta of 0.73, indicating that its share price is 27% less volatile than the S&P 500.

Dividends

Meritage Homes pays an annual dividend of $1.92 per share and has a dividend yield of 3.0%. Leggett & Platt pays an annual dividend of $0.20 per share and has a dividend yield of 2.2%. Meritage Homes pays out 40.2% of its earnings in the form of a dividend. Leggett & Platt pays out 12.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Meritage Homes has increased its dividend for 2 consecutive years. Meritage Homes is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Meritage Homes beats Leggett & Platt on 14 of the 18 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 Leggett & Platt

Leggett & Platt, Inc. engages in the manufacture and distribution of furniture and engineered components and products among homes, offices, automobiles, and commercial aircraft. It operates through the following segments: Bedding Products, Specialized Products, and Furniture, Flooring & Textile Products. The Bedding Products segment supplies products and components for the home, including mattress springs and specialty foam, as well as adjustable beds, bedding machinery, steel rod, and drawn wire. The Specialized Products segment supplies titanium, nickel, and stainless-steel tubing for the aerospace industry, and serves the construction market with its hydraulic cylinders group. The Flooring, Furniture & Textile Products segment produces an extensive line of components and engineered systems for office, residential, and contract furniture manufacturers. The company was founded by J. P. Products and C. B. Platt in 1883 and is headquartered in Carthage, MO.