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

Zacks Equity Research
·2-min read

Investors interested in stocks from the Building Products - Home Builders sector have probably already heard of Toll Brothers (TOL) and NVR (NVR). But which of these two companies is the best option for those looking for undervalued stocks? Let's take a closer look.

We have found that the best way to discover great value opportunities is to pair a strong Zacks Rank with a great 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.

Toll Brothers has a Zacks Rank of #2 (Buy), while NVR has a Zacks Rank of #4 (Sell) right now. Investors should feel comfortable knowing that TOL likely has seen a stronger improvement to its earnings outlook than NVR has recently. But this is just one piece of the puzzle 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.

TOL currently has a forward P/E ratio of 7, while NVR has a forward P/E of 19.81. 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 2.95.

Another notable valuation metric for TOL is its P/B ratio of 0.69. 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 4.67.

Based on these metrics and many more, TOL holds a Value grade of B, while NVR has a Value grade of D.

TOL has seen stronger estimate revision activity and sports more attractive valuation metrics than NVR, so it seems like value investors will conclude that TOL is the superior option right now.


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Toll Brothers Inc. (TOL) : Free Stock Analysis Report
 
NVR, Inc. (NVR) : Free Stock Analysis Report
 
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