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Is KB Home (KBH) a Great Value Stock Right Now?

Zacks Equity Research
Wyndham (WYND) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.

Of these, value investing is easily one of the most popular ways to find great stocks in any market environment. Value investors use fundamental analysis and traditional valuation metrics to find stocks that they believe are being undervalued by the market at large.

Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.

One company to watch right now is KB Home (KBH). KBH is currently sporting a Zacks Rank of #2 (Buy), as well as an A grade for Value. The stock is trading with a P/E ratio of 8.13, which compares to its industry's average of 9.62. KBH's Forward P/E has been as high as 12.85 and as low as 5.61, with a median of 8.57, all within the past year.

Investors should also recognize that KBH has a P/B ratio of 0.92. 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. KBH's current P/B looks attractive when compared to its industry's average P/B of 1.16. Over the past 12 months, KBH's P/B has been as high as 1.40 and as low as 0.77, with a median of 1.07.

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 0.47. This compares to its industry's average P/S of 0.55.

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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