Is It Time To Consider Buying NVR, Inc. (NYSE:NVR)?

Today we're going to take a look at the well-established NVR, Inc. (NYSE:NVR). The company's stock saw significant share price movement during recent months on the NYSE, rising to highs of US$5,729 and falling to the lows of US$4,294. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether NVR's current trading price of US$4,335 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at NVR’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

See our latest analysis for NVR

What is NVR worth?

The share price seems sensible at the moment according to my price multiple model, where I compare the company's price-to-earnings ratio to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 11.84x is currently trading slightly above its industry peers’ ratio of 9.05x, which means if you buy NVR today, you’d be paying a relatively reasonable price for it. And if you believe NVR should be trading in this range, then there isn’t really any room for the share price grow beyond the levels of other industry peers over the long-term. Is there another opportunity to buy low in the future? Since NVR’s share price is quite volatile, we could potentially see it sink lower (or rise higher) in the future, giving us another chance to buy. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.

Can we expect growth from NVR?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 5.6% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for NVR, at least in the short term.

What this means for you:

Are you a shareholder? It seems like the market has already priced in NVR’s growth outlook, with shares trading around industry price multiples. However, there are also other important factors which we haven’t considered today, such as the track record of its management team. Have these factors changed since the last time you looked at NVR? Will you have enough confidence to invest in the company should the price drop below the industry PE ratio?

Are you a potential investor? If you’ve been keeping tabs on NVR, now may not be the most optimal time to buy, given it is trading around industry price multiples. However, the positive growth outlook may mean it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about NVR as a business, it's important to be aware of any risks it's facing. In terms of investment risks, we've identified 1 warning sign with NVR, and understanding it should be part of your investment process.

If you are no longer interested in NVR, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.