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Should Value Investors Buy Tri Pointe Homes (TPH) Stock?
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.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
One company to watch right now is Tri Pointe Homes (TPH - Free Report) . TPH is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 5.89. This compares to its industry's average Forward P/E of 9.38. Over the past year, TPH's Forward P/E has been as high as 6.90 and as low as 2.67, with a median of 3.97.
We should also highlight that TPH has a P/B ratio of 0.77. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. TPH's current P/B looks attractive when compared to its industry's average P/B of 1.11. Over the past year, TPH's P/B has been as high as 1.21 and as low as 0.57, with a median of 0.76.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. TPH has a P/S ratio of 0.52. This compares to its industry's average P/S of 0.55.
Finally, investors should note that TPH has a P/CF ratio of 3.59. 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. TPH's P/CF compares to its industry's average P/CF of 4.79. Over the past year, TPH's P/CF has been as high as 5.66 and as low as 2.66, with a median of 3.45.
These figures are just a handful of the metrics value investors tend to look at, but they help show that Tri Pointe Homes is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, TPH feels like a great value stock at the moment.