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KBH or NVR: Which Is the Better Value Stock Right Now?

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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 stocks presents investors with the better value opportunity right now? Let's take a closer look.

There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. The Zacks Rank favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Right now, KB Home is sporting a Zacks Rank of #2 (Buy), while NVR has a Zacks Rank of #3 (Hold). This means that KBH's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

Value investors analyze a variety of traditional, tried-and-true metrics to help find companies that they believe are undervalued at their current share price levels.

Our Value category grades stocks based on a number of key metrics, including the tried-and-true P/E ratio, the P/S ratio, earnings yield, and cash flow per share, as well as a variety of other fundamentals that value investors frequently use.

KBH currently has a forward P/E ratio of 9.15, while NVR has a forward P/E of 16.02. We also note that KBH has a PEG ratio of 1.11. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. NVR currently has a PEG ratio of 1.60.

Another notable valuation metric for KBH is its P/B ratio of 1.01. 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, NVR has a P/B of 5.66.

These metrics, and several others, help KBH earn a Value grade of A, while NVR has been given a Value grade of C.

KBH sticks out from NVR in both our Zacks Rank and Style Scores models, so value investors will likely feel that KBH is the better option right now.


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