Reviewing Meritage Homes (NYSE:MTH) and Cavco Industries (NASDAQ:CVCO)

Cavco Industries (NASDAQ:CVCO) and Meritage Homes (NYSE:MTH) are both mid-cap consumer discretionary companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, institutional ownership, valuation, profitability, risk, analyst recommendations and dividends.

Risk & Volatility

Cavco Industries has a beta of 1.27, meaning that its share price is 27% more volatile than the S&P 500. Comparatively, Meritage Homes has a beta of 1.33, meaning that its share price is 33% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent recommendations for Cavco Industries and Meritage Homes, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Cavco Industries	0	3	3	1	2.71
Meritage Homes	2	8	4	0	2.14

Cavco Industries currently has a consensus price target of $695.00, indicating a potential upside of 7.21%. Meritage Homes has a consensus price target of $72.44, indicating a potential upside of 7.92%. Given Meritage Homes’ higher possible upside, analysts clearly believe Meritage Homes is more favorable than Cavco Industries.

Earnings and Valuation

This table compares Cavco Industries and Meritage Homes”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Cavco Industries	$2.24 billion	2.22	$190.55 million	$23.60	27.47
Meritage Homes	$5.86 billion	0.75	$453.01 million	$4.43	15.15

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

Profitability

This table compares Cavco Industries and Meritage Homes’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Cavco Industries	7.89%	16.51%	12.17%
Meritage Homes	5.79%	6.67%	4.50%

Insider & Institutional Ownership

95.6% of Cavco Industries shares are held by institutional investors. Comparatively, 98.4% of Meritage Homes shares are held by institutional investors. 1.7% of Cavco Industries shares are held by company insiders. Comparatively, 2.5% of Meritage Homes shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Summary

Cavco Industries beats Meritage Homes on 8 of the 15 factors compared between the two stocks.

About Cavco Industries

Cavco Industries, Inc. designs, produces, and retails factory-built homes primarily in the United States. It operates in two segments, Factory-Built Housing and Financial Services. The company markets its factory-built homes under the Cavco, Fleetwood, Palm Harbor, Nationwide, Fairmont, Friendship, Chariot Eagle, Destiny, Commodore, Colony, Pennwest, R-Anell, Manorwood, MidCountry, and Solitaire brands. It produces park model RVs; vacation cabins; and factory-built commercial structures, including apartment buildings, condominiums, hotels, workforce housing, schools, and housing for the United States military troops. In addition, the company produces various modular homes, which include single and multi-section ranch, split-level, and Cape Cod style homes, as well as two- and three-story homes, and multi-family units. Further, it provides conforming and non-conforming mortgages and home-only loans to purchasers of various brands of factory-built homes sold by company-owned retail stores, as well as various independent distributors, builders, communities, and developers. Additionally, the company offers property and casualty insurance to owners of manufactured homes. It distributes its products through a network of independent and company-owned retailers, planned community operators, and residential developers. Cavco Industries, Inc. was founded in 1965 and is headquartered in Phoenix, Arizona.

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.