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Author: rogerquick Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 8  
Subject: Re: MTH Looks great! Date: 8/26/1999 12:50 AM
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I just took a look at this stock (also prompted by its high rating in Fortune). I'm looking for one more stock to put in my protfolio and am strongly considering this one.

The only concern I have is the high level of debt on the balance sheet. It appears Meritage is snapping up property at a far quicker pace than it is generating cash. The problem with this is that interest rates are trending upward. This not only effects MTH's P&L with higher interest charges, but it also drives down demand for MTH's houses. MTH's profitability has been down significantly for the past two quarters when compared with the same quarters in the prior year. That doesn't seem to be a result from weak demand, however, as sales were up significantly. Hopefully the profitability decrease is only temporary.

It's hard to argue against a stock, though, with such an outrageously low P/E coupled with high growth. Good luck with the stock. I might just have to join you.

Roger

P.S. I bought KELL a couple of weeks ago. KELL has shown growth similar to MTH and also has a low P/E. KELL's problem is also debt, though this may partially be solved through a new off-balance-sheet financing arrangement. KELL's market cap is also well below its book value. With today's nutty valuations, though, who knows what's worth what anymore? KELL's website will give you a pretty decent overview of the company. MTH has a slick website, too, if you haven't already wandered over.
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