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

Investors interested in Building Products - Home Builders stocks are likely familiar with Dream Finders Homes Inc. (DFH) and NVR (NVR). But which of these two stocks presents investors with the better value opportunity right now? 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 proven Zacks Rank puts an emphasis on earnings estimates and estimate revisions, while our Style Scores work to identify stocks with specific traits.

Currently, Dream Finders Homes Inc. has a Zacks Rank of #2 (Buy), while NVR has a Zacks Rank of #4 (Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that DFH 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 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.

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.

DFH currently has a forward P/E ratio of 6.47, while NVR has a forward P/E of 17.39. We also note that DFH has a PEG ratio of 2.56. 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 3.86.

Another notable valuation metric for DFH is its P/B ratio of 1.51. 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 5.33.

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

DFH stands above NVR thanks to its solid earnings outlook, and based on these valuation figures, we also feel that DFH 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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