Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put William Lyon Homes stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, William Lyon has a trailing twelve months PE ratio of 10.71, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 19.85. If we focus on the long-term PE trend, William Lyon’s current PE level puts it below its midpoint over the past four years, with the number having been more or less stable over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Building- Residential/Commercial industry’s trailing twelve months PE ratio, which stands at 11.94. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that William Lyon has a forward PE ratio (price relative to this year’s earnings) of just 7.69, so it is fair to say that a slightly more value-oriented path may be ahead for William Lyon stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, William Lyon has a P/S ratio of about 0.50. This is significantly lower than the S&P 500 average, which comes in at 2.97 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, WLH is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, William Lyon currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes William Lyon a solid choice for value investors.
What About the Stock Overall?
Though William Lyon might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘F’ and a Momentum score of ‘A’. This gives WLH a Zacks VGM score—or its overarching fundamental grade—of ‘C’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent consensus estimate trend has been encouraging. While the consensus estimate for the current quarter has risen by 1.5% in the past two months, the full year estimate has inched higher as well by 1.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Lyon William Homes Price and Consensus
Lyon William Homes Price and Consensus | Lyon William Homes Quote
This slightly bullish trend indicates that analysts feel good about this company right now, despite the fact that the stock has just a Zacks Rank #3 (Hold), which signals expectations of in-line performance from the company in the near term.
Bottom Line
William Lyon is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a robust industry rank (among the Top 32%) instills investor confidence.
However, with a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks categorized Building- Residential/Commercial industry has underperformed the broader market, as you can see below:
Despite the poor past performance of the industry, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this the positive estimate revisions and robust value metrics, and we believe that we have a strong value contender in William Lyon.
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Can William Lyon (WLH) Be a Solid Choice for Value Investors?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put William Lyon Homes stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, William Lyon has a trailing twelve months PE ratio of 10.71, as you can see in the chart below:
This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 19.85. If we focus on the long-term PE trend, William Lyon’s current PE level puts it below its midpoint over the past four years, with the number having been more or less stable over the past few months.
Further, the stock’s PE also compares favorably with the Zacks classified Building- Residential/Commercial industry’s trailing twelve months PE ratio, which stands at 11.94. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that William Lyon has a forward PE ratio (price relative to this year’s earnings) of just 7.69, so it is fair to say that a slightly more value-oriented path may be ahead for William Lyon stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, William Lyon has a P/S ratio of about 0.50. This is significantly lower than the S&P 500 average, which comes in at 2.97 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
If anything, WLH is in the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading—at least compared to historical norms.
Broad Value Outlook
In aggregate, William Lyon currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes William Lyon a solid choice for value investors.
What About the Stock Overall?
Though William Lyon might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘F’ and a Momentum score of ‘A’. This gives WLH a Zacks VGM score—or its overarching fundamental grade—of ‘C’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent consensus estimate trend has been encouraging. While the consensus estimate for the current quarter has risen by 1.5% in the past two months, the full year estimate has inched higher as well by 1.3%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Lyon William Homes Price and Consensus
Lyon William Homes Price and Consensus | Lyon William Homes Quote
This slightly bullish trend indicates that analysts feel good about this company right now, despite the fact that the stock has just a Zacks Rank #3 (Hold), which signals expectations of in-line performance from the company in the near term.
Bottom Line
William Lyon is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. Furthermore, a robust industry rank (among the Top 32%) instills investor confidence.
However, with a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks categorized Building- Residential/Commercial industry has underperformed the broader market, as you can see below:
Despite the poor past performance of the industry, a good industry rank signals that the stock is likely to benefit from favorable broader factors in the immediate future. Add to this the positive estimate revisions and robust value metrics, and we believe that we have a strong value contender in William Lyon.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>