In November 2018, KB Home (NYSE:KBH) released its latest earnings announcement, which revealed that the company endured a slight headwind with earnings deteriorating from US$179m to US$169m, a change of -5.6%. Below, I’ve presented key growth figures on how market analysts perceive KB Home’s earnings growth outlook over the next few years and whether the future looks brighter. Note that I will be looking at net income excluding extraordinary items to get a better understanding of the underlying drivers of earnings.
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Market analysts’ consensus outlook for the upcoming year seems optimistic, with earnings climbing by a significant 53%. This high growth in earnings is expected to continue, bringing the bottom line up to US$305m by 2022.
Even though it is helpful to understand the growth each year relative to today’s level, it may be more beneficial estimating the rate at which the earnings are moving every year, on average. The advantage of this approach is that we can get a better picture of the direction of KB Home’s earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To calculate this rate, I’ve appended a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 19%. This means that, we can assume KB Home will grow its earnings by 19% every year for the next couple of years.
For KB Home, I’ve put together three pertinent aspects you should further research:
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Valuation: What is KBH worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether KBH is currently mispriced by the market.
- Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of KBH? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.