KB Home (KBH) Is Strong On High Volume Today

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.

Trade-Ideas LLC identified KB Home ( KBH) as a strong on high relative volume 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 $42.2 million.
  • KBH has traded 2.7 million shares today.
  • KBH is trading at 7.62 times the normal volume for the stock at this time of day.
  • KBH is trading at a new high 7.02% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on KBH:

KB Home operates as a homebuilding company 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 under the name KB Home. The stock currently has a dividend yield of 0.7%. KBH has a PE ratio of 2. Currently there are 2 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 3.1 million shares per day over the past 30 days. KB Home has a market cap of $1.4 billion and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 2.60 and a short float of 24.2% with 5.38 days to cover. Shares are down 10.2% 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 buy. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, reasonable valuation levels and good cash flow from operations. We feel its strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 7.6%. Since the same quarter one year prior, revenues rose by 28.7%. 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.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Household Durables industry and the overall market, KB HOME's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 77.87% to -$48.91 million when compared to the same quarter last year. In addition, KB HOME has also vastly surpassed the industry average cash flow growth rate of -77.63%.
  • KB HOME's earnings per share declined by 33.3% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, KB HOME increased its bottom line by earning $9.03 versus $0.41 in the prior year. For the next year, the market is expecting a contraction of 90.0% in earnings ($0.90 versus $9.03).

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