Are Investors Undervaluing KB Home (KBH) Right Now?
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.
Considering these trends, value investing is clearly one of the most preferred ways to find strong stocks in any type of market. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.
Zacks has developed the innovative Style Scores system to highlight stocks with specific traits. For example, value investors will be interested in stocks with great grades in the "Value" category. When paired with a high Zacks Rank, "A" grades in the Value category are among the strongest value stocks on the market today.
KB Home (KBH) is a stock many investors are watching right now. KBH is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 8.54. This compares to its industry's average Forward P/E of 9.84. Over the past 52 weeks, KBH's Forward P/E has been as high as 9.71 and as low as 2.44, with a median of 3.30.
We should also highlight that KBH has a P/B ratio of 0.90. 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 solid versus its industry's average P/B of 1.15. Over the past 12 months, KBH's P/B has been as high as 1.02 and as low as 0.63, with a median of 0.80.
Value investors also love the P/S ratio, which is calculated by simply dividing a stock's price with the company's sales. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. KBH has a P/S ratio of 0.48. This compares to its industry's average P/S of 0.61.
Finally, investors will want to recognize that KBH has a P/CF ratio of 4.12. This figure highlights a company's operating cash flow and can be used to find firms that are undervalued when considering their impressive cash outlook. KBH's current P/CF looks attractive when compared to its industry's average P/CF of 5.13. Over the past 52 weeks, KBH's P/CF has been as high as 5.18 and as low as 2.80, with a median of 3.66.
These figures are just a handful of the metrics value investors tend to look at, but they help show that KB Home is likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, KBH feels like a great value stock at the moment.
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