Investors interested in Building Products - Home Builders stocks are likely familiar with Dream Finders Homes Inc. (DFH) and NVR (NVR). 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 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.
Currently, Dream Finders Homes Inc. has a Zacks Rank of #2 (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 DFH has an improving earnings outlook. But this is just one factor that value investors are interested in.
Value investors also try to analyze a wide range of traditional figures and metrics to help determine whether 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.
DFH currently has a forward P/E ratio of 7.58, while NVR has a forward P/E of 17.28. We also note that DFH has a PEG ratio of 1.53. 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 3.84.
Another notable valuation metric for DFH is its P/B ratio of 1.75. 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 5.56.
Based on these metrics and many more, DFH holds a Value grade of B, while NVR has a Value grade of C.
DFH stands above NVR thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DFH is 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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