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 offers value investors a better bang for their buck right now? We'll need to 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 Zacks Rank is a proven strategy that targets companies with positive earnings estimate revision trends, while our Style Scores work to grade companies based on specific traits.
KB Home has a Zacks Rank of #2 (Buy), while NVR has a Zacks Rank of #4 (Sell) right now. 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 factor that value investors are interested in.
Value investors also tend to look at a number of traditional, tried-and-true figures to help them find stocks 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 12.23, while NVR has a forward P/E of 16.57. We also note that KBH has a PEG ratio of 1.93. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. NVR currently has a PEG ratio of 6.79.
Another notable valuation metric for KBH is its P/B ratio of 1.18. 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 4.85.
These are just a few of the metrics contributing to KBH's Value grade of B and NVR's Value grade of D.
KBH has seen stronger estimate revision activity and sports more attractive valuation metrics than NVR, so it seems like value investors will conclude that KBH is the superior option right now.