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Are Investors Undervaluing KB Home (KBH) Right Now?

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The proven Zacks Rank system focuses on earnings estimates and estimate revisions to find winning stocks. Nevertheless, we know that our readers all have their own perspectives, so we are always looking at the latest trends in value, growth, and momentum to find 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 a variety of methods, including tried-and-true valuation metrics, to find these stocks.

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 stock to keep an eye on is KB Home (KBH - Free Report) . KBH is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock holds a P/E ratio of 9.42, while its industry has an average P/E of 11.45. KBH's Forward P/E has been as high as 9.80 and as low as 5.72, with a median of 8.12, all within the past year.

Investors will also notice that KBH has a PEG ratio of 0.80. 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 industry currently sports an average PEG of 0.88. Within the past year, KBH's PEG has been as high as 1.09 and as low as 0.64, with a median of 0.76.

Investors should also recognize that KBH has a P/B ratio of 1.58. Investors use the P/B ratio to look at a stock's market value versus 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 1.90. Within the past 52 weeks, KBH's P/B has been as high as 1.64 and as low as 0.88, with a median of 1.28.

Value investors also use the P/S ratio. The P/S ratio is is calculated as price divided by 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 0.97. This compares to its industry's average P/S of 1.05.

Finally, we should also recognize that KBH has a P/CF ratio of 9.99. 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 P/CF compares to its industry's average P/CF of 10.53. KBH's P/CF has been as high as 10.34 and as low as 5.04, with a median of 7.98, all within the past year.

Value investors will likely look at more than just these metrics, but the above data helps show that KB Home is likely undervalued currently. And when considering the strength of its earnings outlook, KBH sticks out at as one of the market's strongest value stocks.


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