Home building company KB Home (KBH) is down more than 4% in Thursday morning’s trading session despite delivering impressive fiscal third-quarter earnings and maintaining an optimistic forecast for the remainder of the year.
Revenue of $1.59 billion beat the analyst consensus of $1.47 billion, but represented a drop in performance year over year – as the company posted revenue of $1.84 billion in 2022.
Net income for the quarter came in at $149.9 million ($1.80 per share) which was a big step back from this time last year when the company reported $255.3 million ($2.86 per share). That being said, the company still outperformed the FactSet consensus of $1.43 per share.
KB Home expects revenue of around $6.31 billion in looking ahead to the remainder of the year – up from the original forecast of $5.8 billion – $6.2 billion given last quarter. This gives the company a nice cushion on the analyst forecast of $6.17 billion in annual revenue.
Chairman and chief executive Jeffrey Mezger says that individuals shouldn’t look at this year’s performance as a “step backward”. He reiterated that 2022 was a year of record-breaking results – and the company is still performing better than expected in 2023.
KB Home is poised to carry this quarter’s momentum into the next and enjoy a more profitable year than originally anticipated. Mezger also noted that demand for new home builds is remaining steady despite the continually rising interest rates.
So, why are shares falling? The stock is down more than 11% in the last month and one would think such an upbeat earnings report would turn things around, but that has not been the case. There is fear that new housing will slow to a halt as interest rates climb higher and higher – affecting companies like KB Home.
But, is this fear rooted in fact – or more of a case of market sentiment? Is it time for investors to be worried about this stock? We’ve taken a look at KBH through the VectorVest stock analysis software to help you tune out the noise and figure out what all this means for you.
While KBH Has Poor Upside Potential and Timing, the Stock Does Have Excellent Safety
VectorVest simplifies your trading strategy by giving you clear, actionable insights in just 3 ratings. These are relative value (RV), relative safety (RS), and relative timing (RT). Each of these sits on a simple scale of 0.00-2.00, with 1.00 being the average.
But, the system also offers a clear buy, sell, or hold recommendation based on the overall VST Rating for any given stock at any given time. As for KBH, here’s what you need to know:
- Poor Upside Potential: The RV rating of 0.84 is considered poor for KBH. This rating draws a comparison between the stock’s long-term price appreciation potential (forecasted 3 years out) and AAA corporate bond rates and risk, offering far superior insights than a simple comparison of price to value alone.
- Excellent Safety: KBH does have an excellent RS rating of 1.40, though, speaking to its risk level. This rating comes from a thorough analysis of the company's financial consistency & predictability, debt-to-equity ratio, and business longevity.
- Poor Timing: As you can see by looking at the stock’s performance in the short and long term, KBH has poor timing. The RT rating of 0.83 is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.
The overall VST rating of 1.06 is above the average and deemed fair - so where does that leave investors? Should you hold your position, buy more shares, or sell off what you have?
With a clear answer just a click away at VectorVest, you don’t have to let guesswork or emotion influence your decision-making. Get a free stock analysis today and make your next move with complete confidence and clarity!
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VectorVest advocates buying safe, undervalued stocks, rising in price. Despite posting impressive 3rd quarter earnings and maintaining an upbeat forecast for the remainder of the year, shares of KBH are falling further and further. The stock has poor upside potential and timing but excellent safety right now.
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