Back to top

Should Value Investors Buy KB Home (KBH) Stock?

Read MoreHide Full Article

The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find strong picks.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.

In addition to the Zacks Rank, investors looking for stocks with specific traits can utilize our Style Scores system. Of course, value investors will be most interested in the system's "Value" category. Stocks with "A" grades for Value and high Zacks Ranks are among the best value stocks available at any given moment.

One company value investors might notice is KB Home (KBH - Free Report) . KBH is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock is trading with P/E ratio of 8.81 right now. For comparison, its industry sports an average P/E of 9.99. Over the past year, KBH's Forward P/E has been as high as 12.55 and as low as 5.61, with a median of 8.53.

Investors should also note that KBH holds a PEG ratio of 1.07. This figure is similar to the commonly-used P/E ratio, with the PEG ratio also factoring in a company's expected earnings growth rate. KBH's PEG compares to its industry's average PEG of 1.12. KBH's PEG has been as high as 1.20 and as low as 0.31, with a median of 0.79, all within the past year.

We should also highlight that KBH has a P/B ratio of 1.03. The P/B ratio pits a stock's market value against its book value, which is defined as total assets minus total liabilities. This stock's P/B looks solid versus its industry's average P/B of 1.27. Over the past year, KBH's P/B has been as high as 1.26 and as low as 0.77, with a median of 1.01.

Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. This is a prefered metric because revenue can't really be manipulated, so sales are often a truer performance indicator. KBH has a P/S ratio of 0.53. This compares to its industry's average P/S of 0.57.

Finally, investors should note that KBH has a P/CF ratio of 8.64. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This company's current P/CF looks solid when compared to its industry's average P/CF of 8.83. KBH's P/CF has been as high as 21.52 and as low as 7.51, with a median of 11.55, all within the past year.

These are only a few of the key metrics included in KB Home's strong Value grade, but they help show that the stock is likely undervalued right now. When factoring in the strength of its earnings outlook, KBH looks like an impressive value stock at the moment.

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

KB Home (KBH) - free report >>

Published in