Critical Survey: Meritage Homes (MTH) vs. Great Lakes Dredge and Dock (GLDD)

Meritage Homes (NYSE: MTH) and Great Lakes Dredge and Dock (NASDAQ:GLDD) are both small-cap construction companies, but which is the superior business? We will compare the two companies based on the strength of their earnings, analyst recommendations, institutional ownership, dividends, profitability, valuation and risk.

Insider and Institutional Ownership

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95.2% of Meritage Homes shares are held by institutional investors. Comparatively, 77.0% of Great Lakes Dredge and Dock shares are held by institutional investors. 5.6% of Meritage Homes shares are held by company insiders. Comparatively, 8.2% of Great Lakes Dredge and Dock shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares Meritage Homes and Great Lakes Dredge and Dock’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 $3.23 billion 0.56 $143.25 million $3.88 11.55
Great Lakes Dredge and Dock $702.50 million 0.41 -$31.26 million ($0.27) -17.22

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

Volatility & Risk

Meritage Homes has a beta of 1.19, suggesting that its share price is 19% more volatile than the S&P 500. Comparatively, Great Lakes Dredge and Dock has a beta of 0.8, suggesting that its share price is 20% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Meritage Homes and Great Lakes Dredge and Dock, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Meritage Homes 0 5 5 0 2.50
Great Lakes Dredge and Dock 0 1 1 0 2.50

Meritage Homes currently has a consensus price target of $52.30, suggesting a potential upside of 16.74%. Great Lakes Dredge and Dock has a consensus price target of $7.00, suggesting a potential upside of 50.54%. Given Great Lakes Dredge and Dock’s higher possible upside, analysts clearly believe Great Lakes Dredge and Dock is more favorable than Meritage Homes.

Profitability

This table compares Meritage Homes and Great Lakes Dredge and Dock’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Meritage Homes 4.44% 10.76% 5.15%
Great Lakes Dredge and Dock -4.45% -6.64% -1.79%

Summary

Meritage Homes beats Great Lakes Dredge and Dock on 11 of the 13 factors compared between the two stocks.

Meritage Homes Company Profile

Meritage Homes Corporation designs and builds single-family 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 various homebuyers, including first-time, move-up, active-adult, and luxury homes under the Meritage Homes brand name. The company also provides warranty and customer services; and insurance and closing/settlement services for its homebuyers. It builds and sells homes in Texas, Arizona, California, Colorado, Florida, North Carolina, South Carolina, Georgia, and Tennessee. Meritage Homes Corporation was founded in 1985 and is based in Scottsdale, Arizona.

Great Lakes Dredge and Dock Company Profile

Great Lakes Dredge & Dock Corporation provides dredging services in the United States and internationally. It operates through two segments, Dredging, and Environmental & Infrastructure. The Dredging segment is involved in capital dredging that consists of port expansion projects, coastal restoration and land reclamations, trench digging for pipelines, tunnels and cables, and other dredging related to the construction of breakwaters, jetties, canals, and other marine structures. This segment also engages in channel deepening and port infrastructure development; coastal protection projects; re-dredging previously deepened waterways and harbors; and lake and river dredging, inland levee and construction dredging, environmental restoration and habitat improvement, and other marine construction projects. It serves federal, state, and local governments; foreign governments; and domestic and foreign private concerns, such as utilities, oil, and other energy companies. The Environmental & Infrastructure segment provides environmental and geotechnical construction services, including the creation, repair, or stabilization of environmental barriers; and remediation services comprising the containment, immobilization, or removal of contamination from an environment. It serves general contractors, corporations, superfund potentially responsible parties, and environmental engineering and construction firms, as well as federal and municipal government agencies. The company operates a fleet of 20 dredges, 16 material transportation barges, 1 drillboat, and various other support vessels. The company was formerly known as Lydon & Drews Partnership and changed its name to Great Lakes Dredge & Dock Corporation in 1905. Great Lakes Dredge & Dock Corporation was founded in 1890 and is headquartered in Oak Brook, Illinois.

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