Investors interested in Building Products - Home Builders stocks are likely familiar with KB Home (KBH) and NVR (NVR). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.
Currently, KB Home has a Zacks Rank of #1 (Strong Buy), while NVR has a Zacks Rank of #2 (Buy). Investors should feel comfortable knowing that KBH likely has seen a stronger improvement to its earnings outlook than NVR has recently. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
KBH currently has a forward P/E ratio of 11.78, while NVR has a forward P/E of 17.34. We also note that KBH has a PEG ratio of 1.34. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. NVR currently has a PEG ratio of 1.62.
Another notable valuation metric for KBH is its P/B ratio of 1.27. 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 6.25.
These metrics, and several others, help KBH earn a Value grade of A, while NVR has been given a Value grade of C.
KBH has seen stronger estimate revision activity and sports more attractive valuation metrics than NVR, so it seems like value investors will conclude that KBH is the superior option right now.
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