KB Home
KBH
$47.05
+1.86%
KB Home is a U.S. residential construction company that builds single-family homes and master-planned communities for first-time and move-up buyers across four geographic segments — West Coast (its largest revenue contributor), Southwest, Central, and Southeast — supplemented by land acquisition/development activity and mortgage banking through a joint venture. It occupies a distinct niche as one of the few large public builders built around a consumer-choice, built-to-order model (the "KB Home Studio" approach) rather than spec inventory, positioning it between the production builders and the custom segment. The current investor debate centers on whether that built-to-order pivot can restore profitability after a sharp cyclical downturn: Q1 FY2026 revenue fell 22.6% year-over-year to $1.08 billion and gross margin compressed to 15.7%, prompting headlines about dividends and buybacks being at risk, while a June 2026 rally reflected optimism that the new operating model will lift future margins. Recent Q3 results beat lowered estimates but still showed declining revenue against a weak housing backdrop, leaving the stock in a show-me phase where execution on orders, pricing, and incentives — not narrative — will drive the next leg.…
KBH
KB Home
$47.05
Related headlines
KBH 12-Month Price Forecast
Wall Street consensus
Most Wall Street analysts maintain a constructive view on KB Home's 12-month outlook, with a consensus price target around $51.14 and implied upside of +8.7% versus the current price.
Average Target
$51.14
0 analysts
Implied Upside
+8.7%
vs. current price
Analyst Count
—
covering this stock
Price Range
$39 - $70
Analyst target range
Coverage is solid, with 14 analysts and a consensus recommendation of "hold" (mean rating 3.24 on a 1–5 scale, where higher is more cautious). The average target price is $51.14, implying roughly +8.7% upside from the current $47.05 — a modest, neutral-to-slightly-constructive signal rather than a bullish call. Consensus estimates of $4.54 average EPS and $5.45 billion average revenue for the forward period imply analysts expect stabilization, not recovery, and the hold consensus reflects genuine disagreement about the timing of the margin turnaround.\n\nThe target range is wide — $39.00 low to $70.00 high, a spread of about 79% around the average — which signals high uncertainty about the built-to-order pivot and the housing cycle. The $70 high target assumes successful execution of the new operating model, margin recovery toward the high-teens/low-20s, and multiple re-rating; the $39 low target prices continued volume declines, further incentive-driven margin compression, and a prolonged housing downturn. Recent institutional actions skew cautious: UBS and Barclays remain Buy/Overweight, but Wells Fargo is Underweight, Goldman, BofA, RBC, Truist, and JP Morgan are Neutral/Hold, and Raymond James downgraded to Market Perform from Outperform in December 2025 — a pattern of fading conviction that supports the wide spread and the hold consensus.
Bulls vs Bears: KBH Investment Factors
The bear case currently holds stronger evidence: revenue is contracting at an accelerating 22.62% pace, gross margin has eroded roughly 470 basis points year-over-year to 15.69%, and the forward PE sitting above the trailing PE confirms the market expects further earnings decline. The bull case rests almost entirely on two things — a fortress balance sheet (0.444 debt-to-equity, 4.57 current ratio, $290.2 million TTM free cash flow) and the unproven built-to-order pivot that sparked the June rally — neither of which yet shows up in the numbers. The single most important tension is whether the KB Home Studio model can restore gross margins toward the 20%+ level before the housing cycle or incentive-driven pricing pushes them lower still; that margin line, more than orders or valuation, will determine whether the 10.16x trailing PE is a value entry or a value trap. Until gross margin stabilizes above the high-teens, the stock's 15% cushion above its 52-week low and hold-rated consensus reflect appropriate caution rather than opportunity.
Bullish
- Balance sheet is fortress-like: Debt-to-equity of just 0.444 and a current ratio of 4.57 mean KBH can absorb a prolonged housing downturn without external financing. TTM free cash flow of $290.2 million, backed by Q4 FY2025 operating cash flow of $306.8 million against only $13.8 million of capex, shows the business still converts inventory to cash even while earnings fall.
- Valuation already discounts deterioration: At 10.16x trailing PE, 0.70x price-to-sales, 1.12x price-to-book and 0.92x EV/sales, KBH trades at or below typical builder levels. The $51.14 average analyst target implies +8.7% upside from $47.05, and the stock sits only ~15% above its 52-week low of $40.92, so much of the cyclical pain appears priced in.
- Built-to-order pivot could reset margins: The June 2026 rally from ~$52.73 to $61.51 in a single session reflected optimism that the KB Home Studio built-to-order model will lift future profitability versus spec inventory. If it works, gross margin could recover from the current 15.69% toward the 20.43% earned in Q1 FY2025 and the 21.1% FY2024 level, a roughly 470-basis-point swing that would materially re-rate earnings.
- Capital returns still funded: Despite the earnings slump, the dividend yields 1.57% on a conservative 16% payout ratio, and KBH repurchased over $100 million of stock in Q4 FY2025 alone while still repaying debt. Share count has fallen from 75.1 million diluted in Q4 FY2024 to 63.7 million in Q1 FY2026, which amplifies per-share recovery when earnings inflect.
Bearish
- Revenue contraction is accelerating: Q1 FY2026 revenue of $1.077 billion fell 22.62% year-over-year, following declines in every prior quarter: Q4 FY2025 $1.694 billion vs $2.000 billion, Q3 FY2025 $1.620 billion vs $1.753 billion, Q2 FY2025 $1.530 billion vs $1.710 billion. The trend is deepening, not stabilizing, and with home building at $1.686 billion of segment revenue there is no diversification cushion.
- Margins have collapsed across the P&L: Gross margin fell to 15.69% from 20.43% a year earlier, operating margin dropped to 3.38% from 9.38%, and net margin compressed to 3.10% from 7.87%. EBITDA collapsed to $47.6 million from $148.2 million, and net income of $33.4 million (EPS $0.53) is down two-thirds from $109.6 million (EPS $1.52).
- Forward PE above trailing signals shrinking earnings: The unusual inversion of a 13.12x forward PE versus a 10.16x trailing PE means the market expects earnings to fall from the trailing base. A negative PEG ratio of -0.37 confirms contraction rather than value, and the $4.54 consensus forward EPS implies analysts model stabilization, not recovery.
- Analyst conviction is fading: The consensus is only 'hold' with a mean rating of 3.24 across 14 analysts, and the $39–$70 target range spans roughly 79% around the $51.14 average. Raymond James downgraded to Market Perform from Outperform in December 2025, Wells Fargo is Underweight, and Goldman, BofA, RBC, Truist and JP Morgan are all Neutral/Hold.
KBH Technical Analysis
KB Home is in a sustained, broad-based downtrend: the stock is down 25.34% over the past year and 17.56% year-to-date, with a maximum drawdown of -37.27% from its peak. At $47.05, the shares sit at roughly 22.6% of the 52-week range of $40.92–$67.57 — deep in the lower quartile and only about 15% above the 52-week low. That positioning signals a falling-knife profile rather than a momentum setup: the stock has repeatedly failed to hold rallies, and relative strength versus the S&P 500 is -38.47% over one year, confirming severe underperformance rather than mere sector beta.\n\nShort-term momentum is mixed but still net negative. The 1-month change of -21.21% is far worse than the 3-month change of -17.11% and the 6-month change of -14.87%, meaning the pace of decline accelerated into October — a bearish acceleration, not a decelerating selloff. The one constructive datapoint is the most recent session: the stock jumped 1.86% on the final day (from $46.19 to $47.05) on volume of about 1.77 million shares, and the 1-month relative strength of +0.81% versus a -1.02% SPY month shows KBH marginally outperforming a soft tape over the last four weeks. That divergence is too small and too recent to call a reversal, but it hints at nascent mean-reversion interest near the lows.\n\nKey levels are well defined. Support sits at the 52-week low of $40.92 — a break below would confirm the downtrend and likely trigger momentum-driven selling toward new lows; resistance is the 52-week high of $67.57, with intermediate supply likely in the mid-$50s where the stock repeatedly stalled in July and August. With a beta of 1.337, KBH is roughly 34% more volatile than the market, so position sizing should assume amplified moves in both directions; a short ratio of 5.58 days-to-cover also means short-covering can produce sharp, unsustainable squeezes (as seen in the late-June spike from ~$52 to $62).
Beta
1.34
1.34x market volatility
Max Drawdown
-37.3%
Largest decline past year
52-Week Range
$41-$68
Price range past year
Annual Return
-25.3%
Cumulative gain past year
| Period | KBH Return | S&P 500 |
|---|---|---|
| 1m | -0.2% | -1.5% |
| 3m | -17.1% | +2.8% |
| 6m | -14.9% | +6.8% |
| 1y | -25.3% | +12.2% |
| ytd | -17.6% | +11.4% |
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KBH Fundamental Analysis
The revenue trajectory is clearly deteriorating. Q1 FY2026 revenue of $1.077 billion fell 22.62% year-over-year, a sharp deceleration from the prior quarters: Q4 FY2025 revenue of $1.694 billion, Q3 FY2025 of $1.620 billion, and Q2 FY2025 of $1.530 billion were all down versus the comparable FY2024 quarters (Q4 FY2024: $2.000 billion; Q3 FY2024: $1.753 billion; Q2 FY2024: $1.710 billion). The entire business is essentially one segment — home building at $1.686 billion in the latest reported segment data — so there is no diversification cushion; the decline reflects lower deliveries and selling prices, and the multi-quarter trend shows contraction deepening rather than stabilizing, which undermines the investment case until order trends inflect.\n\nProfitability has compressed materially. Q1 FY2026 net income was $33.4 million (EPS $0.53) on a 15.69% gross margin, versus Q1 FY2025 net income of $109.6 million (EPS $1.52) on a 20.43% gross margin — a roughly 470-basis-point margin erosion and a two-thirds decline in earnings. The compression is consistent across the P&L: operating margin fell to 3.38% from 9.38% a year earlier, and net margin dropped to 3.10% from 7.87%, while EBITDA collapsed to $47.6 million from $148.2 million. For a homebuilder, high-teens gross margins are already thin relative to the 20–22% range KBH earned in FY2024–FY2025, so the current level signals heavy incentives and pricing pressure; the company remains profitable, but the trajectory is toward the low end of its historical band.\n\nThe balance sheet is the strongest part of the story. Debt-to-equity is a conservative 0.444, the current ratio is a very liquid 4.57, and TTM free cash flow is a healthy $290.2 million — supported by Q4 FY2025 operating cash flow of $306.8 million against capex of just $13.8 million. ROE of 10.99% and ROA of 2.69% are modest but positive, and the company returned capital aggressively (over $100 million of buybacks in Q4 FY2025 alone) while still repaying debt. The caveat is working-capital volatility — Q1 FY2025 saw a $334.3 million operating cash outflow as inventory was built — so cash generation is lumpy; nonetheless, with $230.4 million of cash at FY2025 year-end and modest leverage, KBH can fund operations internally without external financing, though the earnings slump puts the dividend (1.57% yield, 16% payout) and buyback pace at risk.
Quarterly Revenue
$1.1B
2026-02
Revenue YoY Growth
-22.6%
YoY Comparison
Gross Margin
15.7%
Latest Quarter
Free Cash Flow
$290247000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is KBH Overvalued?
Because KB Home is profitable (net income of $33.4 million in the latest quarter and positive TTM EPS), the PE ratio is the appropriate primary metric. The trailing PE is 10.16x versus a forward PE of 13.12x — an unusual inversion where the forward multiple is higher than the trailing, implying the market expects earnings to decline from the trailing base (consistent with the 22.6% revenue drop and margin compression). On a forward basis, the stock trades at 13.1x estimated EPS of $4.54, which is not demanding in absolute terms but reflects a shrinking earnings base rather than growth.\n\nRelative to the residential construction sector, KBH screens cheap on asset- and sales-based measures: price-to-book of 1.12x, price-to-sales of 0.70x, and EV/sales of 0.92x are all at or below typical builder levels, while EV/EBITDA of 9.90x is moderate. The apparent discount is partly justified: gross margin of 18.78% and net margin of 6.88% are below the company's own FY2024 levels (21.1% and 9.5%), and the negative PEG ratio of -0.37 reflects earnings contraction rather than a value opportunity. In short, the low headline multiples are a value trap unless margins stabilize — the discount prices in continued deterioration, not superior growth.\n\nHistorically, KBH's valuation sits in the middle-to-low end of its own band. Its trailing PE of 10.16x compares with 29.8x in Q1 FY2026 (on depressed quarterly earnings), 10.07x in Q4 FY2025, and 7.92x in Q4 FY2024, while its price-to-book of 1.12x is above the 0.88x trough in Q1 FY2026 but well below the 1.49x peak in Q4 FY2024. The stock is therefore not at a historical extreme — it is cheap versus its 2024 peak but not at the deep-value lows seen in late 2022 (PE ~3.1x, P/B ~0.73x), suggesting the market is pricing a prolonged but not catastrophic downturn.
PE
10.2x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 2x~10x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
9.9x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks are concentrated in the earnings trajectory. Revenue fell 22.62% year-over-year to $1.077 billion in Q1 FY2026, and the entire business is effectively one segment — home building at $1.686 billion — so there is no diversification buffer against lower deliveries and selling prices. Gross margin of 15.69% is roughly 470 basis points below the 20.43% earned a year earlier, and operating margin of 3.38% versus 9.38% leaves little room for error; a further 200–300 basis points of incentive-driven compression would push the company toward breakeven. The dividend (1.57% yield, 16% payout) and the aggressive buyback pace — over $100 million in Q4 FY2025 alone — are funded by lumpy cash flow that swung to a $334.3 million operating outflow in Q1 FY2025, so capital returns could be cut if the downturn persists.
Market and competitive risks center on valuation compression and cyclical sensitivity. KBH trades at 10.16x trailing but 13.12x forward earnings, an inversion that prices in decline, and its negative PEG of -0.37 means cheap headline multiples offer no growth support. With a beta of 1.337, the stock is roughly 34% more volatile than the market, and its -38.47% one-year relative strength versus the S&P 500 shows it is not merely tracking sector beta but underperforming it badly. The built-to-order model differentiates KBH from production builders, but if rivals match on consumer choice while KBH carries higher per-unit costs, the margin gap could persist; recent coverage — including the March 2026 Investing.com piece flagging dividends and buybacks at risk and the September 2026 Zacks note calling it a cautious hold — reinforces that sentiment remains fragile.
The worst-case scenario is a housing downturn that forces deeper incentives while the built-to-order transition raises costs before it raises prices, compressing gross margin into the low-teens and triggering a dividend cut and analyst downgrades. In that chain, the stock would retest and likely break its 52-week low of $40.92, which from the current $47.05 represents roughly -13%; a break below that level, given the -37.27% max drawdown already endured and the 5.58-day short ratio amplifying momentum selling, could extend toward the $39 analyst low target, or about -17% from here. A realistic adverse case is therefore a -13% to -17% decline to the $39–$41 zone, with a deeper selloff toward the mid-$30s if margins fall below 14%.