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KBH vs. MTH: Which Stock Is the Better Value Option?

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Investors with an interest in Building Products - Home Builders stocks have likely encountered both KB Home (KBH - Free Report) and Meritage Homes (MTH - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.

Right now, KB Home is sporting a Zacks Rank of #2 (Buy), while Meritage Homes has a Zacks Rank of #3 (Hold). Investors should feel comfortable knowing that KBH likely has seen a stronger improvement to its earnings outlook than MTH has recently. But this is just one factor that value investors are interested in.

Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether a company is undervalued at its current share price levels.

The Style Score Value grade factors in a variety of key fundamental metrics, including the popular P/E ratio, P/S ratio, earnings yield, cash flow per share, and a number of other key stats that are commonly used by value investors.

KBH currently has a forward P/E ratio of 10.13, while MTH has a forward P/E of 13.34. We also note that KBH has a PEG ratio of 1.15. 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. MTH currently has a PEG ratio of 1.40.

Another notable valuation metric for KBH is its P/B ratio of 1.09. 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, MTH has a P/B of 1.37.

These are just a few of the metrics contributing to KBH's Value grade of A and MTH's Value grade of C.

KBH stands above MTH thanks to its solid earnings outlook, and based on these valuation figures, we also feel that KBH is the superior value option right now.


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