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"We rate KB HOME (KBH) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels, increase in net income, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
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Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 7.1%. Since the same quarter one year prior, revenues slightly increased by 7.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- KB HOME's earnings per share declined by 6.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. 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 ($1.27 versus $0.41).
- The net income growth from the same quarter one year ago has exceeded that of the Household Durables industry average, but is less than that of the S&P 500. The net income increased by 4.0% when compared to the same quarter one year prior, going from $27.28 million to $28.36 million.
- In its most recent trading session, KBH has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- You can view the full analysis from the report here: KBH Ratings Report