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

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Investors with an interest in Building Products - Home Builders stocks have likely encountered both KB Home (KBH - Free Report) and NVR (NVR - Free Report) . But which of these two stocks offers value investors a better bang for their buck right now? We'll need to 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.

KB Home has a Zacks Rank of #2 (Buy), while NVR has a Zacks Rank of #3 (Hold) right now. The Zacks Rank favors stocks that have recently seen positive revisions to their earnings estimates, so investors should rest assured that KBH has an improving earnings 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.

The Value category of the Style Scores system identifies undervalued companies by looking at a number of key metrics. These include the long-favored P/E ratio, P/S ratio, earnings yield, cash flow per share, and a variety of other fundamentals that help us determine a company's fair value.

KBH currently has a forward P/E ratio of 9.54, while NVR has a forward P/E of 17.06. We also note that KBH has a PEG ratio of 0.81. 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 3.50.

Another notable valuation metric for KBH is its P/B ratio of 1.51. 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 6.15.

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

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


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