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

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

Analyst Recommendations

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

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

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

Valuation & Earnings

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

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

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.

Insider & Institutional Ownership

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

Risk and Volatility

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

Profitability

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

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

Summary

Cavco Industries beats Meritage Homes on 8 of the 15 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 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.