Assessing KB Home (KBH) Valuation After Mixed Returns And Conflicting Fair Value Estimates

Simply Wall St.01-25

AdvertisementEvent context and recent stock performance KB Home (KBH) has drawn investor attention recently after a period of mixed share performance, with the stock showing a small gain over the past...

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For context, KB Home reported revenue of US$6,236.214 million and net income of US$428.789 million, with year over year revenue and net income figures signaling modest changes that some investors are reassessing alongside the stock’s recent moves. See our latest analysis for KB Home. At a share price of US$59.04, KB Home’s recent 1 day and 7 day share price declines sit against a 30 day share price return of 3.02%. The 1 year total shareholder return decline of 10.19% contrasts with stronger 3 year and 5 year total shareholder returns of 64.78% and 53.14%, which suggests longer term holders have still seen meaningful gains even as near term momentum has faded. If KB Home’s reset in sentiment has you reassessing housing related names, it could also be a good moment to look across the broader auto manufacturers universe for other ideas. With KB Home’s shares sitting close to analyst targets and recent returns mixed, the key question now is whether the current valuation already reflects its earnings profile, or if the recent pullback hints at a buying opportunity with markets pricing in future growth. Most Popular Narrative: 7.4% Undervalued KB Home’s most followed narrative puts fair value at $63.75, a touch above the recent $59.04 close, which immediately raises questions about what is driving that gap.  The analysts have a consensus price target of $66.692 for KB Home based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $86.0, and the most bearish reporting a price target of just $55.0.  Read the complete narrative. There is a detailed story sitting behind that $63.75 fair value. It leans heavily on future earnings, revenue trends, margin pressure and a richer earnings multiple. Curious how those moving parts fit together, and what an almost 10% earnings reset implies for longer term value. This narrative uses a discount rate of 9.66% to bring expected future cash flows back to today, then weighs softer margins against slightly brighter revenue assumptions and a higher future earnings multiple. It also factors in ongoing share repurchases, which reduce the share count over time and can lift earnings per share even if total earnings ease back. The result is a fair value that sits a little above the current share price, with the gap largely explained by how much weight is put on earnings resilience versus pressure on profitability. Result: Fair Value of $63.75 (UNDERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, that story can break if softer buyer demand persists or if regional issues, like heavier price cuts in markets such as Florida, continue to squeeze margins. Find out about the key risks to this KB Home narrative. Another View: Cash Flows Point the Other Way While the popular narrative suggests KB Home is 7.4% undervalued with a fair value of $63.75, our DCF model presents a different perspective, putting future cash flow value at $34.94 per share. From that viewpoint, the recent $59.04 price appears expensive rather than cheap. This gap is large enough that it raises a straightforward question for you as an investor: do you rely on the earnings-based story around margins and multiples, or the more conservative cash flow view that indicates limited upside at today’s price? Look into how the SWS DCF model arrives at its fair value. KBH Discounted Cash Flow as at Jan 2026Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out KB Home for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 874 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.  Build Your Own KB Home Narrative If you look at the numbers and reach a different conclusion, or simply prefer to test your own assumptions, you can build a custom view in just a few minutes, starting with Do it your way. A great starting point for your KB Home research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision. Looking for more investment ideas? If KB Home has sharpened your focus, do not stop there. Broaden your watchlist with focused screeners that surface clear, data driven opportunities across different themes.  Target potential mispricings by checking out these 874 undervalued stocks based on cash flows that may offer stronger cash flow support at current prices. Ride powerful tech trends by scanning these 24 AI penny stocks shaping the future of automation, data analysis and digital infrastructure. Boost your income focus by reviewing these 13 dividend stocks with yields > 3% that can add yield alongside potential share price moves.   This article by Simply Wall St is general in nature. We provide commentary based on historical data\n    and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your\n    financial situation. We aim to bring you long-term focused analysis driven by fundamental data.\n    Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.\n    Simply Wall St has no position in any stocks mentioned.Valuation is complex, but we're here to simplify it.Discover if KB Home might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.Access Free AnalysisHave feedback on this article? Concerned about the content? Get in touch with us directly. 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