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

Investors interested in Building Products - Home Builders stocks are likely familiar with Persimmon Plc (PSMMY) and NVR (NVR). But which of these two stocks presents investors with the better value opportunity right now? Let's take a closer look.

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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Persimmon Plc and NVR are sporting Zacks Ranks of #2 (Buy) and #3 (Hold), respectively, right now. This means that PSMMY's earnings estimate revision activity has been more impressive, so investors should feel comfortable with its improving analyst outlook. However, value investors will care about much more than just this.

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.

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.

PSMMY currently has a forward P/E ratio of 10.98, while NVR has a forward P/E of 16.78. We also note that PSMMY has a PEG ratio of 3.25. This popular figure is similar to the widely-used P/E ratio, but the PEG ratio also considers a company's expected EPS growth rate. NVR currently has a PEG ratio of 10.30.

Another notable valuation metric for PSMMY is its P/B ratio of 1. The P/B is a method of comparing a stock's market value to its book value, which is defined as total assets minus total liabilities. By comparison, NVR has a P/B of 4.9.

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

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

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

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