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 "dead cat bounce" (down big yesterday but up big today) 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 $66.3 million.
  • KBH has traded 4.2 million shares today.
  • KBH is up 3% today.
  • KBH was down 6.2% yesterday.

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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%. KBH has a PE ratio of 73.1. Currently there are 3 analysts that rate KB Home a buy, 3 analysts rate it a sell, and 10 rate it a hold.

The average volume for KB Home has been 4.3 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 2.51 and a short float of 35.6% with 4.82 days to cover. Shares are up 4.2% year-to-date as of the close of trading on Thursday.

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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, impressive record of earnings per share growth and compelling growth in net income. 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 revenue growth has slightly outpaced the industry average of 29.2%. Since the same quarter one year prior, revenues rose by 29.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 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 continued to lose money by earning -$0.76 versus -$2.33 in the prior year. This year, the market expects an improvement in earnings ($0.61 versus -$0.76).
  • Net operating cash flow has significantly decreased to -$133.86 million or 1050.63% 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 3.89 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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