Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 stocks made the list for top value stocks in the Construction & Engineering industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Construction & Engineering Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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3 Undervalued Construction & Engineering Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Construction & Engineering industry for Monday, August 19, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Construction & Engineering industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

Forestar Group Inc’s Value Grade

Value Grade:

Forestar Group Inc. is a residential lot development company. The Company is focused primarily on making investments in land acquisition and development to sell finished single-family residential lots to homebuilders. The Company operates through its real estate segment. The real estate segment primarily acquires land and installs infrastructure for single-family residential communities, and sales residential single-family finished lots to local, regional and national homebuilders. Its real estate segment conducts a range of project planning and management activities related to the entitlement, acquisition, community development and sale of residential lots. The Company has operations in over 52 markets and approximately 20 states and its lot position consisted of 90,100 residential lots, of which approximately 61,800 were owned and 28,300 were controlled through purchase contracts.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Forestar Group Inc has a Value Score of 74, which is considered to be undervalued.

When you look at Forestar Group Inc’s price-to-sales ratio at 0.96 compared to the industry median at 0.98, this company has a lower price relative to revenue compared to its peers. This could make Forestar Group Inc’s stock more attractive for value investors.

Forestar Group Inc’s price-earnings ratio is 7.30 compared to the industry median at 23.99. This means it has a lower share price relative to earnings compared to its peers. This could make Forestar Group Inc more attractive for value investors.

Now, let’s assess Forestar Group Inc’s EV/EBITDA ratio, also known as enterprise multiple. At 8.4, when compared to the industry median of 13.2, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. Forestar Group Inc’s shareholder yield is lower than its industry median ratio of (0.44%). Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. Forestar Group Inc’s price-to-book ratio is lower than its industry median ratio of 2.64. This could make Forestar Group Inc more attractive to investors looking for a new addition to their portfolio.

International Land Alliance Inc’s Value Grade

Value Grade:

International Land Alliance, Inc. is a residential land development company with target properties located in the Baja California, Northern region of Mexico and Southern California. Its principal activities are purchasing properties, obtaining zoning and other entitlements required to subdivide the properties into residential and commercial building lots, securing financing for the purchase of the lots, improving the properties infrastructure and amenities, and selling the plots to homebuyers, retirees, investors, and commercial developers. Its portfolio includes residential, resort and commercial properties comprising various projects, such as Oasis Park Resort, Valle Divino, Plaza Bajamar Resort, Emerald Grove Estates, and Rancho Costa Verde. The Oasis Park Resort is a 497-acres real estate community including 1,344 residential home sites located in south of San Felipe, Baja California. The Valle Divino is a self-contained solar 650-home site project in Ensenada, Baja California.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

International Land Alliance Inc has a Value Score of 87, which is considered to be undervalued.

International Land Alliance Inc’s price-to-book ratio is higher than its peers. This could make International Land Alliance Inc less attractive for value investors when compared to the industry median at 2.64.

You can read more about International Land Alliance Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Southland Holdings Inc’s Value Grade

Value Grade:

Southland Holdings, Inc. is a provider of specialized infrastructure construction services. The Company's segments include Civil and Transportation. The Civil segment operates throughout North America and specializes in services that include the design and construction of water pipeline, pump stations, lift stations, water and wastewater treatment plants, concrete and structural steel, outfall, and tunneling. The Transportation segment operates throughout North America and specializes in services that include the design and construction of bridges, roadways, marine, dredging, ship terminals and piers, and specialty structures and facilities. The Company's customers include public and private entities. Its public sector customers include certain federal agencies, state departments of transportation, local transit authorities, county and city public works departments, and utilities. The Company's private customers consist of the owners of industrial, commercial and residential sites.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Southland Holdings Inc has a Value Score of 67, which is considered to be undervalued.

Southland Holdings Inc’s price-to-book ratio is higher than its peers. This could make Southland Holdings Inc less attractive for value investors when compared to the industry median at 2.64.

You can read more about Southland Holdings Inc’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Construction & Engineering Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Construction & Engineering stocks as well as other industrys.

Choosing Which of the 3 Best Construction & Engineering Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• Forestar Group Inc stock has a Value Grade of B.
• International Land Alliance Inc stock has a Value Grade of A.
• Southland Holdings Inc stock has a Value Grade of B.

Now that you have a bit more background about each of the 3 undervalued stocks in the Construction & Engineering industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Construction & Engineering Stocks

Want to learn more about Construction & Engineering stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 3 Undervalued Construction & Engineering Stocks for Monday, August 19
• 4 Undervalued Construction & Engineering Stocks for Friday, August 16
• 4 Undervalued Construction & Engineering Stocks for Thursday, August 15
• Why Bowman Consulting Group Ltd’s (BWMN) Stock Is Up 7.38%

AAII Disclaimer

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.