KB HOME (NYSE:KBH) – A GARP Candidate Worth Considering for Long-Term Investors

KB HOME (NYSE:KBH) stands out as a potential fit for investors seeking growth at a reasonable price (GARP). The homebuilder meets several key criteria from Peter Lynch’s investment strategy, balancing solid growth with sound financial health and an attractive valuation.

Why KBH Fits the GARP Approach

• Strong Earnings Growth: KBH has delivered an impressive 5-year average EPS growth of 24.25%, well above the 15% minimum threshold in Lynch’s strategy. This suggests the company has consistently expanded profitability.
• Reasonable Valuation: With a PEG ratio of 0.26 (far below the preferred maximum of 1), KBH’s stock price appears undervalued relative to its earnings growth. Its P/E ratio of 6.31 also indicates a cheap valuation compared to industry peers.
• Healthy Financials: The company maintains a Debt/Equity ratio of 0.44, showing a conservative approach to leverage. Its Current Ratio of 5.99 reflects strong liquidity, ensuring it can meet short-term obligations.
• Profitability: KBH’s Return on Equity (ROE) of 15.18% exceeds Lynch’s 15% benchmark, indicating efficient use of shareholder capital.

Fundamental Snapshot

KBH’s financial health is stable, with positive earnings and cash flow in recent years. While its gross margins are below industry averages, operating and net margins have improved. The company also pays a modest dividend with a 1.98% yield, backed by a sustainable payout ratio.

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

Our Peter Lynch Strategy screener lists more stocks matching these criteria and is updated regularly.

Disclaimer

This is not investing advice. The observations here are based on current data, but investors should conduct their own research before making decisions.