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

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Investors interested in stocks from the Building Products - Home Builders sector have probably already heard of Toll Brothers (TOL - Free Report) and NVR (NVR - Free Report) . 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 favors stocks with strong earnings estimate revision trends, and our Style Scores highlight companies with specific traits.

Currently, Toll Brothers has a Zacks Rank of #2 (Buy), while NVR has a Zacks Rank of #5 (Strong Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that TOL is likely seeing its earnings outlook improve to a greater extent. But this is just one factor that value investors are interested in.

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.

TOL currently has a forward P/E ratio of 11.34, while NVR has a forward P/E of 15.43. We also note that TOL has a PEG ratio of 0.64. 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 0.91.

Another notable valuation metric for TOL is its P/B ratio of 1.43. 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 5.60.

These are just a few of the metrics contributing to TOL's Value grade of B and NVR's Value grade of C.

TOL stands above NVR thanks to its solid earnings outlook, and based on these valuation figures, we also feel that TOL is the superior value option right now.


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