TOL vs. LEN: Which Stock Should Value Investors Buy Now?
Investors looking for stocks in the Building Products - Home Builders sector might want to consider either Toll Brothers (TOL) or Lennar (LEN). But which of these two stocks is more attractive to value investors? We'll need to take a closer look to find out.
There are plenty of strategies for discovering value stocks, but we have found that pairing a strong Zacks Rank with an impressive grade in the Value category of our Style Scores system produces the best returns. 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, Toll Brothers has a Zacks Rank of #2 (Buy), while Lennar has a Zacks Rank of #5 (Strong Sell). This system places an emphasis on companies that have seen positive earnings estimate revisions, so investors should feel comfortable knowing that TOL is likely seeing its earnings outlook improve to a greater extent. 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.
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.
TOL currently has a forward P/E ratio of 7.12, while LEN has a forward P/E of 10.81. We also note that TOL has a PEG ratio of 0.65. This metric is used similarly to the famous P/E ratio, but the PEG ratio also takes into account the stock's expected earnings growth rate. LEN currently has a PEG ratio of 10.59.
Another notable valuation metric for TOL is its P/B ratio of 1.05. The P/B ratio is used to compare a stock's market value with its book value, which is defined as total assets minus total liabilities. For comparison, LEN has a P/B of 1.17.
These are just a few of the metrics contributing to TOL's Value grade of A and LEN's Value grade of C.
TOL stands above LEN thanks to its solid earnings outlook, and based on these valuation figures, we also feel that TOL is the superior value option right now.
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Toll Brothers Inc. (TOL) : Free Stock Analysis Report
Lennar Corporation (LEN) : Free Stock Analysis Report
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