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Are Investors Undervaluing Beazer Homes USA (BZH) Right Now?

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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.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

On top of the Zacks Rank, investors can also look at our innovative Style Scores system to find stocks with specific traits. For example, value investors will want to focus on the "Value" category. Stocks with high Zacks Ranks and "A" grades for Value will be some of the highest-quality value stocks on the market today.

One company value investors might notice is Beazer Homes USA (BZH - Free Report) . BZH is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 1.95, which compares to its industry's average of 4.19. Over the last 12 months, BZH's Forward P/E has been as high as 6.21 and as low as 1.69, with a median of 4.28.

Investors should also recognize that BZH has a P/B ratio of 0.47. 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 0.99. Over the past year, BZH's P/B has been as high as 1.04 and as low as 0.42, with a median of 0.79.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. BZH has a P/S ratio of 0.18. This compares to its industry's average P/S of 0.5.

Finally, investors will want to recognize that BZH has a P/CF ratio of 2.07. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 4.36. BZH's P/CF has been as high as 7 and as low as 1.84, with a median of 4.11, all within the past year.

Toll Brothers (TOL - Free Report) may be another strong Building Products - Home Builders stock to add to your shortlist. TOL is a # 2 (Buy) stock with a Value grade of A.

Shares of Toll Brothers are currently trading at a forward earnings multiple of 4.06 and a PEG ratio of 0.36 compared to its industry's P/E and PEG ratios of 4.19 and 0.52, respectively.

TOL's Forward P/E has been as high as 9.97 and as low as 3.80, with a median of 6.79. During the same time period, its PEG ratio has been as high as 0.63, as low as 0.18, with a median of 0.28.

Toll Brothers sports a P/B ratio of 0.97 as well; this compares to its industry's price-to-book ratio of 0.99. In the past 52 weeks, TOL's P/B has been as high as 1.70, as low as 0.91, with a median of 1.39.

These figures are just a handful of the metrics value investors tend to look at, but they help show that Beazer Homes USA and Toll Brothers are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, BZH and TOL feels like a great value stock at the moment.


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