NEW YORK (TheStreet) -- Shares of KB Home (KBH), one of the largest homebuilders in the U.S., have been under pressure for most of 2015. Not only is KBH stock down more than 10%, against 2% gains in the S&P 500 (SPX), but it has grossly underperformed its peers, as evidenced by the 6% gains in SPDR S&P Homebuilder ETF (XHB).
All told, since KB Home closed at $16.54 on Jan. 12, shares have fallen more than 11%, and they're down more than 15% from their 2015 high of $17.25. So ahead of the company's second-quarter earnings results, due out Friday before the opening bell, the Los Angeles-based builder is at a great entry point for investors looking for a solid turnaround candidate. Trading at a price-to-earnings ratio of 1.6 (no, that's not a typo), compared to the average P/E of 21 for the S&P 500 overall, KBH is too cheap to ignore.
Granted, KB Home has benefited this year from a huge income tax benefit that massively boosted its profits. This would explain the disparity between its P/E ratio and that of the broader market. But here's the thing: Even based on its sales metric, KB Home -- at price-to-sales ratio of 0.65 -- still looks cheap, against industry P/S of 1.18.
By comparison, other homebuilders like D.R. Horton (DHI) and Lennar (LEN) trade at P/S ratios of 1.01 and 1.18, respectively. And in the most recent quarter, Lennar's revenue growth was eight percentage points lower than KB Home's (21% vs. 29%). From my vantage point, KB Home is not only less risky today, it has become a must-own stock for the months and quarters ahead.