DHI vs. NVR: Which Stock Is the Better Value Option?
Investors with an interest in Building Products - Home Builders stocks have likely encountered both D.R. Horton (DHI) and NVR (NVR). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
Both D.R. Horton and NVR have a Zacks Rank of # 1 (Strong Buy) right now. This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that these stocks have improving earnings outlooks. But this is just one piece of the puzzle for value investors.
Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.
The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.
DHI currently has a forward P/E ratio of 12.75, while NVR has a forward P/E of 17.45. We also note that DHI has a PEG ratio of 1.35. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. NVR currently has a PEG ratio of 7.15.
Another notable valuation metric for DHI is its P/B ratio of 2.12. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, NVR has a P/B of 5.10.
Based on these metrics and many more, DHI holds a Value grade of B, while NVR has a Value grade of D.
Both DHI and NVR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that DHI is the superior value option right now.
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