Meritage Corporation (MTH)

Short-term

Turnover ratios

Inventory Turnover:

Unfortunately, the data provided for the inventory turnover ratio is missing for all the years, which makes it impossible to evaluate how efficiently Meritage Homes Corp. is managing its inventory levels and turning inventory into sales during those periods.

Receivables Turnover:

The receivables turnover ratio indicates the number of times a company collects its accounts receivable during a specific period. The trend for Meritage Homes Corp. shows a general decline in receivables turnover from 2019 to 2023, suggesting that the company took longer to collect payments from its customers over time. This could indicate potential issues with credit policies or the ability of customers to pay in a timely manner.

Payables Turnover:

The payables turnover ratio reflects how quickly a company pays off its suppliers. The data reveals a relatively stable payables turnover for Meritage Homes Corp. from 2019 to 2023, indicating a consistent payment cycle with suppliers. A higher turnover ratio may suggest better management of payables but could also indicate a strained relationship with suppliers if payments are being made too quickly.

Working Capital Turnover:

The working capital turnover ratio assesses the efficiency of a company in utilizing its working capital to generate sales revenue. The data for Meritage Homes Corp. demonstrates fluctuations in the working capital turnover ratio over the five-year period, with a significant drop in 2020 followed by an increase in 2021 before declining again in subsequent years. A higher turnover ratio generally signifies that the company efficiently converts working capital into sales, while a lower ratio may indicate inefficiencies in resource allocation or low sales relative to working capital levels.

Overall, while the receivables turnover and payables turnover ratios provide insights into Meritage Homes Corp.'s management of receivables and payables, the missing data for the inventory turnover ratio limits a comprehensive assessment of the company's overall efficiency in managing its assets and liabilities.

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Average number of days

Days of inventory on hand (DOH) provides insight into how efficiently Meritage Homes is managing its inventory. Unfortunately, the data for this ratio is missing in the provided table, hindering a comprehensive analysis.

On the other hand, Days of Sales Outstanding (DSO) indicates how quickly the company is collecting its accounts receivable. A decreasing trend in DSO from 2019 to 2023 suggests that Meritage Homes has been improving its collection process, turning its sales into cash at a faster rate.

Number of Days of Payables reflects how long it takes for Meritage Homes to pay its suppliers. The increase in this ratio from 2019 to 2023 may imply that the company is taking longer to settle its payables, possibly indicating strained relationships with suppliers or cash flow management strategies.

In summary, while the improvement in Days of Sales Outstanding is positive, the increasing trend in Number of Days of Payables requires further examination to understand its implications on Meritage Homes' financial health and relationships with stakeholders.

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Long-term

Long-term activity ratios provide insights into how efficiently a company is utilizing its long-term assets to generate sales.

1. Fixed Asset Turnover:
- The fixed asset turnover ratio measures how effectively a company is using its fixed assets to generate revenue. A higher ratio indicates better utilization of fixed assets.
- Meritage Homes Corp.'s fixed asset turnover has fluctuated over the years but generally remained above 1. This suggests that the company has been effectively utilizing its fixed assets to generate sales, with a decrease in 2023 compared to the previous year.
- The decline in fixed asset turnover from 1.43 in 2022 to 1.28 in 2023 may indicate a decrease in the efficiency of using fixed assets to generate revenue, which could be a concern for the company's long-term asset management.

2. Total Asset Turnover:
- The total asset turnover ratio assesses how efficiently a company is utilizing all of its assets to generate revenue. A higher ratio indicates better overall asset utilization.
- Meritage Homes Corp.'s total asset turnover has also shown some fluctuations over the years, with a slight decrease in 2023 compared to the previous year.
- The decline in total asset turnover from 1.09 in 2022 to 0.96 in 2023 suggests that the company may have become less efficient in generating revenue from its total assets, which could be a sign of potential inefficiencies in asset management or operational challenges that may need to be addressed.

In conclusion, while Meritage Homes Corp. has demonstrated generally effective utilization of its long-term assets to generate sales, the decreases in both fixed asset turnover and total asset turnover in 2023 compared to the previous year indicate a potential need for the company to reassess its asset management strategies to maintain efficiency and profitability in the long term.