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Are Investors Undervaluing These Construction Stocks Right Now?

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Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Of these, perhaps no stock market trend is more popular than value investing, which is a strategy that has proven to be successful in all sorts of market environments. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One stock to keep an eye on is Meritage Homes (MTH). MTH is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 4.95, which compares to its industry's average of 6.99. Over the past year, MTH's Forward P/E has been as high as 8.98 and as low as 4.54, with a median of 5.90.

Another valuation metric that we should highlight is MTH's P/B ratio of 1.53. 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. MTH's current P/B looks attractive when compared to its industry's average P/B of 1.59. Within the past 52 weeks, MTH's P/B has been as high as 1.81 and as low as 1.26, with a median of 1.46.

Finally, we should also recognize that MTH has a P/CF ratio of 6.52. This metric focuses on a firm's operating cash flow and is often used to find stocks that are undervalued based on the strength of their cash outlook. MTH's current P/CF looks attractive when compared to its industry's average P/CF of 8.86. MTH's P/CF has been as high as 8.80 and as low as 5.44, with a median of 6.96, all within the past year.

Another great Building Products - Home Builders stock you could consider is PulteGroup (PHM), which is a # 2 (Buy) stock with a Value Score of A.

PulteGroup is currently trading with a Forward P/E ratio of 6.49 while its PEG ratio sits at 0.27. Both of the company's metrics compare favorably to its industry's average P/E of 6.99 and average PEG ratio of 0.49.

Over the last 12 months, PHM's P/E has been as high as 9.56, as low as 5.48, with a median of 6.62, and its PEG ratio has been as high as 1.01, as low as 0.24, with a median of 0.75.

Additionally, PulteGroup has a P/B ratio of 2.02 while its industry's price-to-book ratio sits at 1.59. For PHM, this valuation metric has been as high as 2.45, as low as 1.63, with a median of 1.96 over the past year.

These are only a few of the key metrics included in Meritage Homes and PulteGroup strong Value grade, but they help show that the stocks are likely undervalued right now. When factoring in the strength of its earnings outlook, MTH and PHM look like an impressive value stock at the moment.


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Meritage Homes Corporation (MTH) : Free Stock Analysis Report
 
PulteGroup, Inc. (PHM) : Free Stock Analysis Report
 
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