Investors interested in stocks from the Building Products - Home Builders sector have probably already heard of PulteGroup (PHM) and NVR (NVR). But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Right now, both PulteGroup and NVR are sporting a Zacks Rank of # 1 (Strong Buy). This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. But this is only part of the picture for value investors.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks that they believe are undervalued at their current share price levels.
Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.
PHM currently has a forward P/E ratio of 10.34, while NVR has a forward P/E of 17.69. We also note that PHM has a PEG ratio of 1.10. 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 3.65.
Another notable valuation metric for PHM is its P/B ratio of 2.02. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. By comparison, NVR has a P/B of 5.46.
These metrics, and several others, help PHM earn a Value grade of B, while NVR has been given a Value grade of D.
Both PHM and NVR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PHM is the superior value option right now.
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PulteGroup, Inc. (PHM): Free Stock Analysis Report
NVR, Inc. (NVR): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.