Investors looking for stocks in the Building Products - Home Builders sector might want to consider either Tri Pointe Homes (TPH - Free Report) or 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.
Currently, Tri Pointe Homes has a Zacks Rank of #1 (Strong Buy), while NVR has a Zacks Rank of #3 (Hold). The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that TPH has an improving earnings outlook. But this is just one factor that value investors are interested in.
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.
TPH currently has a forward P/E ratio of 4.42, while NVR has a forward P/E of 12.26. We also note that TPH has a PEG ratio of 0.40. 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 1.26.
Another notable valuation metric for TPH is its P/B ratio of 0.44. 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 4.26.
These metrics, and several others, help TPH earn a Value grade of A, while NVR has been given a Value grade of C.
TPH sticks out from NVR in both our Zacks Rank and Style Scores models, so value investors will likely feel that TPH is the better option right now.