Investors with an interest in Building Products - Home Builders stocks have likely encountered both Dream Finders Homes Inc. (DFH) and NVR (NVR). But which of these two companies is the best option for those looking for undervalued stocks? 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 proven Zacks Rank emphasizes companies with positive estimate revision trends, and our Style Scores highlight stocks with specific traits.
Right now, Dream Finders Homes Inc. is sporting a Zacks Rank of #2 (Buy), while NVR has a Zacks Rank of #4 (Sell). Investors should feel comfortable knowing that DFH likely has seen a stronger improvement to its earnings outlook than NVR has recently. But this is only part of the picture for value investors.
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 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.
DFH currently has a forward P/E ratio of 7.16, while NVR has a forward P/E of 15.10. We also note that DFH has a PEG ratio of 1.44. 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. NVR currently has a PEG ratio of 3.36.
Another notable valuation metric for DFH is its P/B ratio of 1.70. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, NVR has a P/B of 5.31.
These are just a few of the metrics contributing to DFH's Value grade of A and NVR's Value grade of D.
DFH is currently sporting an improving earnings outlook, which makes it stick out in our Zacks Rank model. And, based on the above valuation metrics, we feel that DFH is likely the superior value option right now.
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Dream Finders Homes, Inc. (DFH): Free Stock Analysis Report NVR, Inc. (NVR): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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