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KBH vs. NVR: Which Stock Is the Better Value Option?

Zacks Equity Research

Investors looking for stocks in the Building Products - Home Builders sector might want to consider either KB Home (KBH) or NVR (NVR). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.

The best way to find great value stocks is to pair a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system. 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 and NVR are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, 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 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.

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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.

KBH currently has a forward P/E ratio of 10.11, while NVR has a forward P/E of 16.99. We also note that KBH has a PEG ratio of 1.16. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. NVR currently has a PEG ratio of 1.58.

Another notable valuation metric for KBH is its P/B ratio of 1.40. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. For comparison, NVR has a P/B of 5.89.

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

KBH 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 KBH is likely the superior value option right now.


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KB Home (KBH) : Free Stock Analysis Report
 
NVR, Inc. (NVR) : Free Stock Analysis Report
 
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