Investors looking for stocks in the Building Products - Home Builders sector might want to consider either PulteGroup (PHM - Free Report) or D.R. Horton (DHI - Free Report) . But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
Everyone has their own methods for finding great value opportunities, but our model includes pairing an impressive grade in the Value category of our Style Scores system with a strong Zacks Rank. The Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
PulteGroup and D.R. Horton are both sporting a Zacks Rank of # 1 (Strong Buy) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that both of these companies have improving earnings outlooks. But this is only part of the picture for value investors.
Value investors are also interested in a number of tried-and-true valuation metrics that help show when 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.
PHM currently has a forward P/E ratio of 8.21, while DHI has a forward P/E of 11.67. We also note that PHM has a PEG ratio of 0.42. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. DHI currently has a PEG ratio of 1.17.
Another notable valuation metric for PHM is its P/B ratio of 1.82. 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. By comparison, DHI has a P/B of 1.95.
These are just a few of the metrics contributing to PHM's Value grade of A and DHI's Value grade of C.
Both PHM and DHI are impressive stocks with solid earnings outlooks, but based on these valuation figures, we feel that PHM is the superior value option right now.