Should Meritage’s Shrinking Backlog and Profitability Trends Require Action From Meritage Homes (MTH) Investors?

• In recent analysis released before 5 January 2026, Meritage Homes was reported to have experienced a 34.4% decline in its sales backlog over two years, alongside earnings per share falling 16.8% annually and weakening returns on capital.
• This combination of a shrinking backlog, decreasing profitability, and lower capital efficiency suggests that Meritage’s earlier profit pools may be becoming harder to replicate.
• We’ll now examine how the sharp backlog contraction, and what it implies for future orders, reshapes Meritage Homes’ investment narrative.

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Meritage Homes Investment Narrative Recap

To own Meritage Homes today, you need to believe the company can convert its expanded community footprint and focus on entry-level buyers into steady orders despite a softer backdrop. The sharp 34.4% backlog decline and falling EPS directly challenge that thesis in the near term, because they touch both the key catalyst of higher volumes and the biggest current risk of earnings volatility from limited forward visibility.

The most relevant recent announcement here is Meritage’s upcoming Q4 2025 earnings release on 28 January 2026, which should shed light on how much of the backlog contraction is flowing through to new orders, pricing, and margins. With recent results already showing lower net profit margins and weaker returns on equity, that update could be important in reassessing how resilient the order book really is if demand softens further.

Yet beneath the headline order growth story, there is a risk around how Meritage’s thin backlog and short sales to close timelines can leave investors exposed to sudden demand shocks that they should be aware of...

Read the full narrative on Meritage Homes (it's free!)

Meritage Homes' narrative projects $7.1 billion revenue and $549.0 million earnings by 2028. This implies 4.8% yearly revenue growth and a $89.3 million earnings decrease from $638.3 million today.

Uncover how Meritage Homes' forecasts yield a $83.12 fair value, a 26% upside to its current price.

Exploring Other Perspectives

Three members of the Simply Wall St Community currently see Meritage’s fair value anywhere between US$74 and about US$323, highlighting how far apart individual views can be. Against that backdrop, the recent backlog contraction and earnings pressure make it especially important to compare these different opinions and understand how each one weighs the risk of more volatile revenue and margins ahead.

Explore 3 other fair value estimates on Meritage Homes - why the stock might be worth over 4x more than the current price!

Build Your Own Meritage Homes Narrative

Disagree with existing narratives? Create your own in under 3 minutes - extraordinary investment returns rarely come from following the herd.

• A great starting point for your Meritage Homes research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.
• Our free Meritage Homes research report provides a comprehensive fundamental analysis summarized in a single visual - the Snowflake - making it easy to evaluate Meritage Homes' overall financial health at a glance.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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