Meritage Homes (NYSE:MTH) versus Newell Brands (NASDAQ:NWL) Critical Comparison

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

Volatility & Risk

Meritage Homes has a beta of 1.33, suggesting that its stock price is 33% more volatile than the S&P 500. Comparatively, Newell Brands has a beta of 0.88, suggesting that its stock price is 12% 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 3.3%. Newell Brands pays an annual dividend of $0.28 per share and has a dividend yield of 5.0%. Meritage Homes pays out 40.2% of its earnings in the form of a dividend. Newell Brands pays out -52.8% 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 raised its dividend for 2 consecutive years. Newell Brands is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Meritage Homes and Newell Brands”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	0.65	$453.01 million	$4.78	12.31
Newell Brands	$7.20 billion	0.33	-$285.00 million	($0.53)	-10.64

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

Insider and Institutional Ownership

98.4% of Meritage Homes shares are held by institutional investors. Comparatively, 92.5% of Newell Brands shares are held by institutional investors. 2.5% of Meritage Homes shares are held by insiders. Comparatively, 1.6% of Newell Brands shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares Meritage Homes and Newell Brands’ 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%
Newell Brands	-3.05%	12.31%	2.77%

Analyst Ratings

This is a breakdown of recent ratings and target prices for Meritage Homes and Newell Brands, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Meritage Homes	2	7	4	0	2.15
Newell Brands	2	4	3	1	2.30

Meritage Homes presently has a consensus target price of $74.78, suggesting a potential upside of 27.12%. Newell Brands has a consensus target price of $6.66, suggesting a potential upside of 18.02%. Given Meritage Homes’ higher probable upside, analysts plainly believe Meritage Homes is more favorable than Newell Brands.

Summary

Meritage Homes beats Newell Brands on 12 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 Newell Brands

Newell Brands Inc. engages in the design, manufacture, sourcing, and distribution of consumer and commercial products worldwide. The company operates in three segments: Home and Commercial Solutions, Learning and Development, and Outdoor and Recreation. The Commercial Solutions segment provides commercial cleaning and maintenance solution products under the Rubbermaid, Rubbermaid Commercial Products, Mapa, and Spontex brands; closet and garage organization products; hygiene systems and material handling solutions; household products, such as kitchen appliances under the Crockpot, Mr. Coffee, Oster, and Sunbeam brands; small appliances under the Breville brand name in Europe; food and home storage products under the FoodSaver, Rubbermaid, Ball, and Sistema brands; fresh preserving products; vacuum sealing products; and gourmet cookware, bakeware, and cutlery under the Calphalon brand; and home fragrance products under the WoodWick and Yankee Candle brands. The Learning and Development segment offers writing instruments, including markers and highlighters, pens, and pencils; art products; activity-based products; labeling solutions; and baby gear and infant care products under the Dymo, Elmer's, EXPO, Graco, NUK, Paper Mate, Parker, and Sharpie brands. The Outdoor and Recreation segment provides outdoor and outdoor-related products, inlcuding technical apparel and on-the-go beverageware under the Campingaz, Coleman, Contigo, and Marmot brands. It serves warehouse clubs, department and drug/grocery stores, mass merchants, home centers, commercial products distributors, specialty retailers, office superstores and supply stores, contract stationers, e-commerce retailers, and sporting goods, as well as direct to consumers online, select contract customers, and other professional customers. Newell Brands Inc. was founded in 1903 and is based in Atlanta, Georgia.