Investors with an interest in Building Products - Home Builders stocks have likely encountered both PulteGroup (PHM) and NVR (NVR). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
PulteGroup and NVR are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that PHM's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when a company is undervalued at its current share price levels.
Our Value category highlights undervalued companies by looking at a variety of key metrics, including the popular P/E ratio, as well as the P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that have been used by value investors for years.
PHM currently has a forward P/E ratio of 9.85, while NVR has a forward P/E of 18.13. We also note that PHM has a PEG ratio of 0.52. 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 2.39.
Another notable valuation metric for PHM is its P/B ratio of 2.43. 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 6.88.
These metrics, and several others, help PHM earn a Value grade of A, while NVR has been given a Value grade of D.
PHM sticks out from NVR in both our Zacks Rank and Style Scores models, so value investors will likely feel that PHM is the better option right now.
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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.
