Back to top

Image: Bigstock

TOL vs. LEN: Which Stock Is the Better Value Option?

Read MoreHide Full Article

Investors with an interest in Building Products - Home Builders stocks have likely encountered both Toll Brothers (TOL - Free Report) and Lennar (LEN - Free Report) . But which of these two stocks presents investors with the better value opportunity right now? Let's 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.

Currently, Toll Brothers has a Zacks Rank of #2 (Buy), while Lennar has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that TOL likely has seen a stronger improvement to its earnings outlook than LEN has recently. But this is just one factor that value investors are interested in.

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.

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.

TOL currently has a forward P/E ratio of 6.24, while LEN has a forward P/E of 7.17. We also note that TOL has a PEG ratio of 0.57. 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. LEN currently has a PEG ratio of 0.83.

Another notable valuation metric for TOL is its P/B ratio of 0.61. 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, LEN has a P/B of 0.81.

These metrics, and several others, help TOL earn a Value grade of B, while LEN has been given a Value grade of C.

TOL has seen stronger estimate revision activity and sports more attractive valuation metrics than LEN, so it seems like value investors will conclude that TOL is the superior option right now.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Toll Brothers Inc. (TOL) - free report >>

Lennar Corporation (LEN) - free report >>

Published in