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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put PulteGroup,Inc. (PHM - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, PulteGroup has a trailing twelve months PE ratio of 13.7, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.4. If we focus on the long-term PE trend, PulteGroup’s current PE level puts it below its midpoint over the past three years, with the number having falling rapidly over the past few months.
However, the stock’s PE does not compare favorably with the Zacks classified Builiding-Resident/Commercial industry’s trailing twelve months PE ratio, which stands at 13.4. At the very least, this indicates that the stock is slightly overvalued right now, compared to its peers.
We should also point out that PulteGroup has a forward PE ratio (price relative to this year’s earnings) of just 10.6, so it is fair to say that a slightly more value-oriented path may be ahead for PulteGroup stock in the near term.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, PulteGroup has a P/S ratio of about 1.0. This is significantly lower than the S&P 500 average, which comes in at 3.1 right now. Also, as we can see in the chart below, this is fairly below the highs for this stock in particular over the past few years.
If anything, PHM is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, PulteGroup currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes PulteGroup a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for PulteGroup is just 0.7, a level that is far lower than the industry average of 1.11. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, PHM is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though PulteGroup might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘C’ and a Momentum score of ‘F’. This gives PHM a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen no estimates going higher in the past sixty days compared to two lower, while the full year estimate has seen three up and none down in the same time period. As a result, the current quarter consensus estimate has fallen by 6.6% in the past two months, while the full year estimate has increased by 3.7%.
This mixed trend indicates that while the stock’s growth story is intact over the medium term, analysts have some apprehensions about the stock in the immediate future.
Also consider the fact that the company boasts a Zacks Rank #2 (Buy), which indicates robust fundamentals and expectations of outperformance in the near term. Thus, we can say that while investors may expect slight short-term pain, PulteGroup remains a formidable value proposition, with strong supporting growth prospects.
Bottom Line
PulteGroup is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front.
Boasting a good industry rank (top 39% out of more than 250 industries) and a solid Zacks Rank, the company deserves attention right now. In fact, over the past one year, the Zacks Categorized Builiding-Resident/Commercial industry has clearly over performed the broader market, as you can see below:
So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.
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Is PulteGroup a Great Stock for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put PulteGroup,Inc. (PHM - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, PulteGroup has a trailing twelve months PE ratio of 13.7, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.4. If we focus on the long-term PE trend, PulteGroup’s current PE level puts it below its midpoint over the past three years, with the number having falling rapidly over the past few months.
However, the stock’s PE does not compare favorably with the Zacks classified Builiding-Resident/Commercial industry’s trailing twelve months PE ratio, which stands at 13.4. At the very least, this indicates that the stock is slightly overvalued right now, compared to its peers.
We should also point out that PulteGroup has a forward PE ratio (price relative to this year’s earnings) of just 10.6, so it is fair to say that a slightly more value-oriented path may be ahead for PulteGroup stock in the near term.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, PulteGroup has a P/S ratio of about 1.0. This is significantly lower than the S&P 500 average, which comes in at 3.1 right now. Also, as we can see in the chart below, this is fairly below the highs for this stock in particular over the past few years.
If anything, PHM is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, PulteGroup currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes PulteGroup a solid choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for PulteGroup is just 0.7, a level that is far lower than the industry average of 1.11. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, PHM is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though PulteGroup might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘C’ and a Momentum score of ‘F’. This gives PHM a Zacks VGM score—or its overarching fundamental grade—of ‘B’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed at best. The current quarter has seen no estimates going higher in the past sixty days compared to two lower, while the full year estimate has seen three up and none down in the same time period. As a result, the current quarter consensus estimate has fallen by 6.6% in the past two months, while the full year estimate has increased by 3.7%.
PulteGroup, Inc. Price and Consensus
PulteGroup, Inc. Price and Consensus | PulteGroup, Inc. Quote
This mixed trend indicates that while the stock’s growth story is intact over the medium term, analysts have some apprehensions about the stock in the immediate future.
Also consider the fact that the company boasts a Zacks Rank #2 (Buy), which indicates robust fundamentals and expectations of outperformance in the near term. Thus, we can say that while investors may expect slight short-term pain, PulteGroup remains a formidable value proposition, with strong supporting growth prospects.
Bottom Line
PulteGroup is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front.
Boasting a good industry rank (top 39% out of more than 250 industries) and a solid Zacks Rank, the company deserves attention right now. In fact, over the past one year, the Zacks Categorized Builiding-Resident/Commercial industry has clearly over performed the broader market, as you can see below:
So, it might pay for value investors to delve deeper into the company’s prospects, as fundamentals indicate that this stock could be a compelling pick.
Zacks’ Best Private Investment Ideas
In addition to the recommendations that are available to the public on our website, how would you like to follow all Zacks' private buys and sells in real time?
Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Starting today, for the next month, you can have unrestricted access. Click here for Zacks' private trades >>