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Should Value Investors Buy KB Home (KBH) Stock?

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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, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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.

KB Home (KBH - Free Report) is a stock many investors are watching right now. KBH is currently sporting a Zacks Rank of #1 (Strong Buy), as well as a Value grade of A. The stock is trading with a P/E ratio of 9.54, which compares to its industry's average of 9.99. Over the last 12 months, KBH's Forward P/E has been as high as 12.55 and as low as 5.61, with a median of 8.62.

Investors will also notice that KBH has a PEG ratio of 1.09. 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 1.11. Over the past 52 weeks, KBH's PEG has been as high as 1.20 and as low as 0.31, with a median of 1.

Investors should also recognize that KBH has a P/B ratio of 1.14. 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. This stock's P/B looks attractive against its industry's average P/B of 1.28. Over the past 12 months, KBH's P/B has been as high as 1.17 and as low as 0.77, with a median of 1.01.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by sales. This is a popular metric because sales are harder to manipulate on an income statement, so they are often considered a better performance indicator. KBH has a P/S ratio of 0.56. This compares to its industry's average P/S of 0.61.

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.


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