Investors with an interest in Building Products - Home Builders stocks have likely encountered both KB Home (KBH - Free Report) and NVR (NVR - Free Report) . But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.
The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Both KB Home and NVR have a Zacks Rank of # 2 (Buy) right now. This means that both companies have witnessed positive earnings estimate revisions, so investors should feel comfortable knowing that both of these stocks have an improving earnings outlook. However, value investors will care about much more than just this.
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 13.78, while NVR has a forward P/E of 18.48. We also note that KBH has a PEG ratio of 1.56. 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 3.82.
Another notable valuation metric for KBH is its P/B ratio of 1.33. 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 5.74.
Based on these metrics and many more, KBH holds a Value grade of B, while NVR has a Value grade of C.
Both KBH and NVR are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that KBH is the superior value option right now.