KB HOME (NYSE:KBH) – A Homebuilder with Strong Growth and Attractive Valuation

KB HOME (NYSE:KBH) stands out as a potential candidate for long-term investors seeking growth at a reasonable price (GARP). The company meets key criteria from Peter Lynch’s investment strategy, balancing solid earnings growth, financial health, and an attractive valuation.

Why KBH Fits the GARP Approach

• Earnings Growth: KBH has delivered a strong 5-year average EPS growth of 24.25%, well above the minimum 15% threshold in Lynch’s strategy. This indicates sustained profitability without excessive growth that could be unsustainable.
• Reasonable Valuation: With a PEG ratio of 0.26 (far below the preferred maximum of 1), KBH appears undervalued relative to its growth. The P/E ratio of 6.27 also suggests the stock is priced attractively compared to industry peers.
• Healthy Balance Sheet: The company maintains a debt-to-equity ratio of 0.44, below Lynch’s preferred threshold of 0.6. A current ratio of 5.99 further highlights strong liquidity, ensuring KBH can meet short-term obligations.
• Profitability: KBH’s return on equity (ROE) of 15.18% meets Lynch’s requirement of at least 15%, reflecting efficient use of shareholder capital.

Fundamental Snapshot

KBH’s financial health is solid, with improving margins and consistent profitability. While revenue growth has been modest recently (5.54% YoY), the company has demonstrated an 8.77% average annual revenue growth over the past years. The dividend yield of 1.95%, coupled with a 34.29% annual dividend growth rate, adds appeal for income-focused investors.

For a deeper look, review the full fundamental analysis of KBH.

Our Peter Lynch Strategy screener lists more stocks that fit this strategy and is updated regularly.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should always conduct your own research before making investment decisions.