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TOL or NVR: Which Is the Better Value Stock Right Now?

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·2 min read
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Investors looking for stocks in the Building Products - Home Builders sector might want to consider either Toll Brothers (TOL) or NVR (NVR). But which of these two companies is the best option for those looking for undervalued stocks? 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 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, Toll Brothers is sporting a Zacks Rank of #1 (Strong Buy), while NVR has a Zacks Rank of #2 (Buy). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that TOL is likely seeing its earnings outlook improve to a greater extent. But this is just one piece of the puzzle 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.

TOL currently has a forward P/E ratio of 11.26, while NVR has a forward P/E of 15.66. We also note that TOL has a PEG ratio of 0.63. 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 0.87.

Another notable valuation metric for TOL is its P/B ratio of 1.52. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, NVR has a P/B of 5.82.

These are just a few of the metrics contributing to TOL's Value grade of B and NVR's Value grade of C.

TOL sticks out from NVR in both our Zacks Rank and Style Scores models, so value investors will likely feel that TOL is the better option right now.


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Toll Brothers Inc. (TOL) : Free Stock Analysis Report
 
NVR, Inc. (NVR) : Free Stock Analysis Report
 
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Zacks Investment Research