Trade-Ideas: KB Home (KBH) Is Today's

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 "barbarian at the gate" (strong stocks crossing above resistance 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 $101.4 million.
  • KBH has traded 7.2 million shares today.
  • KBH traded in a range 225.9% of the normal price range with a price range of $1.72.
  • KBH traded above its daily resistance level (quality: 4 days, meaning that the stock is crossing a resistance level set by the last 4 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' 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 positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock s movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on KBH:

KB Home operates as a homebuilding and financial services company in the United States. The company 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%. Currently there are 3 analysts that rate KB Home a buy, 2 analysts rate it a sell, and 10 rate it a hold.

The average volume for KB Home has been 4.9 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 2.33 and a short float of 32.2% with 3.10 days to cover. Shares are up 11.6% year to date as of the close of trading on Monday.

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 robust revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk, weak operating cash flow and poor profit margins.

Highlights from the ratings report include:
  • KBH's very impressive revenue growth greatly exceeded the industry average of 21.7%. Since the same quarter one year prior, revenues leaped by 73.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 87.09% and other important driving factors, this stock has surged by 39.05% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • Net operating cash flow has significantly decreased to -$56.57 million or 387.10% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The debt-to-equity ratio is very high at 4.13 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.

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