Critical Survey: La-Z-Boy (NYSE:LZB) versus Meritage Homes (NYSE:MTH)

Meritage Homes (NYSE:MTH) and La-Z-Boy (NYSE:LZB) are both consumer discretionary companies, but which is the superior business? We will compare the two companies based on the strength of their profitability, valuation, earnings, institutional ownership, analyst recommendations, risk and dividends.

Profitability

This table compares Meritage Homes and La-Z-Boy’s 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%
La-Z-Boy	3.86%	11.79%	6.12%

Risk & Volatility

Meritage Homes has a beta of 1.33, meaning that its stock price is 33% more volatile than the S&P 500. Comparatively, La-Z-Boy has a beta of 1.24, meaning that its stock price is 24% more volatile than the S&P 500.

Insider & Institutional Ownership

98.4% of Meritage Homes shares are owned by institutional investors. Comparatively, 99.6% of La-Z-Boy shares are owned by institutional investors. 2.5% of Meritage Homes shares are owned by company insiders. Comparatively, 3.1% of La-Z-Boy shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Meritage Homes and La-Z-Boy, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Meritage Homes	1	8	4	0	2.23
La-Z-Boy	1	1	3	0	2.40

Meritage Homes currently has a consensus target price of $74.78, indicating a potential upside of 24.56%. La-Z-Boy has a consensus target price of $39.50, indicating a potential upside of 33.18%. Given La-Z-Boy’s stronger consensus rating and higher probable upside, analysts plainly believe La-Z-Boy is more favorable than Meritage Homes.

Earnings & Valuation

This table compares Meritage Homes and La-Z-Boy”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Meritage Homes	$5.86 billion	0.67	$453.01 million	$4.78	12.56
La-Z-Boy	$2.13 billion	0.56	$101.99 million	$1.97	15.06

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

Dividends

Meritage Homes pays an annual dividend of $1.92 per share and has a dividend yield of 3.2%. La-Z-Boy pays an annual dividend of $0.97 per share and has a dividend yield of 3.3%. Meritage Homes pays out 40.2% of its earnings in the form of a dividend. La-Z-Boy pays out 49.2% 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 and La-Z-Boy has raised its dividend for 4 consecutive years. La-Z-Boy is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

La-Z-Boy beats Meritage Homes on 9 of the 17 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 La-Z-Boy

La-Z-Boy Incorporated manufactures, markets, imports, exports, distributes, and retails upholstery furniture products, accessories, and casegoods furniture products in the United States, Canada, and internationally. It operates through Wholesale, Retail, Corporate and Other segments. The Wholesale segment manufactures, and imports upholstered furniture, such as recliners and motion furniture, sofas, loveseats, chairs, sectionals, modulars, ottomans, and sleeper sofas; and imports, distributes, and retails casegoods (wood) furniture, including occasional pieces, bedroom sets, dining room sets, entertainment centers, and occasional pieces. This segment sells its products directly to La-Z-Boy Furniture Galleries stores, operators of La-Z-Boy Comfort Studio locations, England Custom Comfort Center locations, dealers, and other independent retailers. The Retail segment sells upholstered furniture, casegoods, and other accessories to the end consumer through its retail network. The company also produces reclining chairs; and manufactures and distributes residential furniture. Its Corporate and Other segment sells the products through its website. The company was formerly known as La-Z-Boy Chair Company and changed its name to La-Z-Boy Incorporated in 1996. La-Z-Boy Incorporated was founded in 1927 and is headquartered in Monroe, Michigan.