Investors interested in Building Products - Home Builders stocks are likely familiar with Meritage Homes (MTH - Free Report) and NVR (NVR - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to take a closer look.
We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great grade in the Value category of our Style Scores system. The proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Meritage Homes and NVR are sporting Zacks Ranks of #1 (Strong Buy) and #2 (Buy), respectively, right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that MTH has an improving earnings outlook. 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.
MTH currently has a forward P/E ratio of 11.67, while NVR has a forward P/E of 17.82. We also note that MTH has a PEG ratio of 1.29. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. NVR currently has a PEG ratio of 1.63.
Another notable valuation metric for MTH is its P/B ratio of 1.35. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, NVR has a P/B of 5.93.
These metrics, and several others, help MTH earn a Value grade of B, while NVR has been given a Value grade of C.
MTH sticks out from NVR in both our Zacks Rank and Style Scores models, so value investors will likely feel that MTH is the better option right now.