KB Home (KBH): Assessing Valuation After a Recent Share Price Pullback

Recent performance and why KB Home is on investors’ radar

KB Home (KBH) has slipped roughly 11% over the past 3 months and about 10% over the past month, even though the stock is still up strongly over the past 3 years. This pullback is prompting fresh questions about whether the homebuilder’s current price fairly reflects its earnings power in a slower housing market.

See our latest analysis for KB Home.

Zooming out, KB Home’s latest share price of $57.07 leaves its 1 year total shareholder return in negative territory, but a still strong 3 year total shareholder return above 70% suggests longer term momentum has not completely faded.

If KB Home’s recent pullback has you rethinking where housing fits in your portfolio, it might be a good time to discover fast growing stocks with high insider ownership.

With earnings growth slowing and the stock trading just below analyst price targets, is KB Home now trading at a meaningful discount, or is the market already pricing in all the future growth ahead?

Most Popular Narrative Narrative: 10.5% Undervalued

With KB Home last closing at $57.07 versus a most popular narrative fair value of $63.75, the storyline leans toward upside despite softer profitability expectations.

The analysts have a consensus price target of $66.692 for KB Home based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $86.0, and the most bearish reporting a price target of just $55.0.

Read the complete narrative.

Curious how shrinking margins, flat revenues and a higher future earnings multiple can still point to upside? Want to see which assumptions really carry this fair value call?

Result: Fair Value of $63.75 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, softer demand and regional pricing pressure, particularly in markets like Florida, could undermine margins and challenge the upside case if conditions worsen.

Find out about the key risks to this KB Home narrative.

Another View: Cash Flows Paint a Harsher Picture

While the popular narrative points to roughly 10% upside, our DCF model tells a different story. It pegs fair value near $35.15 per share, which is well below today’s $57.07 price. This implies KB Home could be meaningfully overvalued if cash flows disappoint. Which story feels more believable to you?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out KB Home for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 875 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own KB Home Narrative

If these views do not quite match your own outlook or you would rather dig into the numbers yourself, you can build a personalised narrative in minutes: Do it your way.

A great starting point for your KB Home research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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