DFH or NVR: Which Is the Better Value Stock Right Now?

Investors looking for stocks in the Building Products - Home Builders sector might want to consider either Dream Finders Homes Inc. (DFH) or 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.

Currently, Dream Finders Homes Inc. has a Zacks Rank of #2 (Buy), while NVR has a Zacks Rank of #4 (Sell). This means that DFH's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. But this is just one piece of the puzzle for value investors.

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.

DFH currently has a forward P/E ratio of 7.06, while NVR has a forward P/E of 17.70. We also note that DFH has a PEG ratio of 2.79. 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 3.93.

Another notable valuation metric for DFH is its P/B ratio of 1.65. 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 5.42.

These metrics, and several others, help DFH earn a Value grade of B, while NVR has been given a Value grade of D.

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

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This article originally published on Zacks Investment Research (zacks.com).

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