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KB Home (KBH) Is Today's Water-Logged And Getting Wetter Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified KB Home ( KBH) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified KB Home as such a stock due to the following factors:

  • KBH has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $72.6 million.
  • KBH has traded 683,093 shares today.
  • KBH traded in a range 207.2% of the normal price range with a price range of $1.11.
  • KBH traded below its daily resistance level (quality: 170 days, meaning that the stock is crossing a resistance level set by the last 170 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

EXCLUSIVE OFFER: Get the inside scoop on opportunities in KBH with the Ticky from Trade-Ideas. See the FREE profile for KBH NOW at Trade-Ideas

More details on KBH:

KB Home is engaged in homebuilding activities in the United States. It constructs and sells various homes, including attached and detached single-family residential homes, townhomes, and condominiums primarily for first-time, move-up, and active adult homebuyers. The stock currently has a dividend yield of 0.6%. KBH has a PE ratio of 38.4. Currently there are 2 analysts that rate KB Home a buy, 5 analysts rate it a sell, and 7 rate it a hold.

The average volume for KB Home has been 5.0 million shares per day over the past 30 days. KB Home has a market cap of $1.5 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 2.35 and a short float of 29.2% with 4.01 days to cover. Shares are down 9.7% year-to-date as of the close of trading on Wednesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates KB Home as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, generally higher debt management risk and weak operating cash flow.

Highlights from the ratings report include:

  • KB HOME reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, KB HOME turned its bottom line around by earning $0.41 versus -$0.76 in the prior year. This year, the market expects an improvement in earnings ($1.26 versus $0.41).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Household Durables industry. The net income increased by 184.8% when compared to the same quarter one year prior, rising from -$12.46 million to $10.56 million.
  • KBH has underperformed the S&P 500 Index, declining 24.86% from its price level of one year ago. Looking ahead, other than the push or pull of the broad market, we do not see anything in the company's numbers that may help reverse the decline experienced over the past 12 months. Despite the past decline, the stock is still selling for more than most others in its industry.
  • The debt-to-equity ratio is very high at 3.98 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.

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