Investors looking for stocks in the Building Products - Home Builders sector might want to consider either PulteGroup (PHM) or 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.
Both PulteGroup and NVR have a Zacks Rank of # 1 (Strong Buy) right now. Investors should feel comfortable knowing that both of these stocks have an improving earnings outlook since the Zacks Rank favors companies that have witnessed positive analyst estimate revisions. But this is just one factor that value investors are interested in.
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 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 9.48, while NVR has a forward P/E of 17.02. We also note that PHM has a PEG ratio of 1.40. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. NVR currently has a PEG ratio of 1.59.
Another notable valuation metric for PHM is its P/B ratio of 1.81. 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 6.43.
Based on these metrics and many more, PHM holds a Value grade of B, while NVR has a Value grade of C.
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
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