Back to top

Image: Bigstock

Are Investors Undervaluing These Construction Stocks Right Now?

Read MoreHide Full Article

While the proven Zacks Rank places an emphasis on earnings estimates and estimate revisions to find strong stocks, we also know that investors tend to develop their own individual strategies. With this in mind, we are always looking at value, growth, and momentum trends to discover great companies.

Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

Beazer Homes USA (BZH - Free Report) is a stock many investors are watching right now. BZH is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with P/E ratio of 3.42 right now. For comparison, its industry sports an average P/E of 6.03. BZH's Forward P/E has been as high as 10.12 and as low as 3.42, with a median of 5.34, all within the past year.

Another notable valuation metric for BZH is its P/B ratio of 0.74. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 1.40. Over the past year, BZH's P/B has been as high as 1.25 and as low as 0.73, with a median of 0.92.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. BZH has a P/S ratio of 0.26. This compares to its industry's average P/S of 0.7.

Finally, investors should note that BZH has a P/CF ratio of 3.44. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. BZH's P/CF compares to its industry's average P/CF of 7.77. Within the past 12 months, BZH's P/CF has been as high as 8.53 and as low as 3.44, with a median of 5.09.

Investors could also keep in mind Tri Pointe Homes (TPH - Free Report) , an Building Products - Home Builders stock with a Zacks Rank of # 2 (Buy) and Value grade of A.

Additionally, Tri Pointe Homes has a P/B ratio of 1.13 while its industry's price-to-book ratio sits at 1.40. For TPH, this valuation metric has been as high as 1.36, as low as 0.97, with a median of 1.17 over the past year.

These are just a handful of the figures considered in Beazer Homes USA and Tri Pointe Homes's great Value grade. Still, they help show that the stock is likely being undervalued at the moment. Add this to the strength of its earnings outlook, and we can clearly see that BZH and TPH is an impressive value stock right now.

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

Beazer Homes USA, Inc. (BZH) - free report >>

Tri Pointe Homes Inc. (TPH) - free report >>

Published in