KB Home
KBH
$48.59
+1.53%
KB Home is a U.S. residential construction company that builds single-family homes and master-planned communities across four geographic segments — West Coast, Southwest, Central, and Southeast — with the West Coast generating the majority of revenue, and it also participates in mortgage banking through a third-party joint venture. The company is a mid-cap, build-to-order homebuilder distinguished by its consumer-centric, choice-driven model that lets buyers personalize homes, positioning it as a value-oriented player focused on first-time and move-up buyers rather than a luxury or spec-heavy builder. The current investor narrative is dominated by a sharp cyclical downturn: Q1 fiscal 2026 revenue fell 22.6% year-over-year to roughly $1.08 billion with EPS of just $0.53, prompting headlines questioning whether the dividend and buyback program are sustainable. Management is betting on a new built-to-order operating model to restore profitability, and a June 2026 stock jump showed investors are willing to reward that pivot narrative even amid weak current results, while the stock's steep underperformance versus the S&P 500 keeps the debate centered on whether housing demand and margins have bottomed.…
KBH
KB Home
$48.59
Related headlines
Investment Opinion: Should I buy KBH Today?
The synthesized recommendation is Hold. KBH presents a classic cyclical value trap: the stock looks cheap at 10.16x trailing PE and 1.12x book value, but earnings are collapsing and the recovery timeline is uncertain. The analyst consensus rating of "hold" (mean 3.13) and average target price of $58.42 imply +24% upside, but the wide target range of $43–$77 and the lack of recent upgrades suggest low conviction in that upside.
Supporting evidence for a Hold is mixed. On the positive side, the balance sheet is strong with debt-to-equity of 0.44, a current ratio of 4.57, and $290.2 million in trailing free cash flow supporting a 1.57% dividend yield with a low 15.99% payout ratio. Valuation is undemanding at 0.70x price-to-sales and 1.12x price-to-book, near the low end of historical ranges. However, revenue is down 22.62% year-over-year, gross margins have compressed to 15.69% from over 20%, and trailing EPS of $0.098 is a fraction of the $5.67 forward estimate, meaning the recovery is entirely back-loaded. The stock's -42.53% relative underperformance versus the S&P 500 over one year confirms the market is pricing in persistent weakness.
The biggest risks that could invalidate the Hold thesis are: (1) further margin compression below 15%, which would threaten the dividend and buyback program; (2) a breakdown below the 52-week low of $44.03, which would signal a fresh leg lower; and (3) failure of the built-to-order model to restore profitability. The rating would upgrade to Buy if gross margins stabilize above 18% and revenue growth turns positive, or if the stock reclaims the mid-$50s on strong volume. It would downgrade to Sell if gross margins fall below 14% or if the dividend is cut. Relative to its own history and peers, KBH is fairly valued to slightly undervalued on assets but expensive on depressed earnings — a neutral risk/reward at current levels.
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KBH 12-Month Price Forecast
KBH is a deeply cyclical homebuilder in the trough of a downturn, with revenue down 22.62% and gross margins compressed to 15.69%. The valuation appears cheap on assets (1.12x book, 0.70x sales) but expensive on depressed earnings, and the forward PE of 10.86x exceeding the trailing PE of 10.16x implies the market expects further earnings declines. The bull case hinges on the built-to-order model restoring margins toward 20%, while the bear case fears a dividend cut and a break below the 52-week low of $44.03. With a beta of 1.336 and a short ratio of 8.89 days, the stock is positioned for high volatility. I would upgrade to bullish if gross margins stabilize above 18% and revenue growth turns positive, and downgrade to bearish if margins fall below 14% or the dividend is cut.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on KB Home's 12-month outlook, with a consensus price target around $58.42 and implied upside of +20.2% versus the current price.
Average Target
$58.42
0 analysts
Implied Upside
+20.2%
vs. current price
Analyst Count
—
covering this stock
Price Range
$43 - $77
Analyst target range
Twelve analysts cover KB Home with a consensus recommendation of "hold" (mean rating 3.13 on a scale where lower is more bullish), and the average price target of $58.42 implies roughly +24% upside from the current $47.12. The distribution skews cautious — recent actions include UBS at Buy, Barclays at Overweight, but also Wells Fargo at Underweight and multiple Neutrals from BofA, Goldman Sachs, RBC, and Truist — so the consensus is best characterized as neutral-to-cautiously-optimistic rather than bullish. The estimated average EPS of $5.67 for the forward period, against a trailing EPS of just $0.098, shows analysts expect a dramatic earnings recovery.\n\nThe target range is very wide, from a low of $43.00 (below the current price, implying -9% downside) to a high of $77.00 (+63% upside), a spread of 79% of the current price that signals high uncertainty and low conviction. The high target assumes the built-to-order model drives margin recovery and multiple expansion back toward prior-cycle levels, while the low target prices in continued margin compression and a prolonged housing downturn. Notably, Raymond James downgraded from Outperform to Market Perform in December 2025, and no firm has upgraded recently — the institutional pattern leans toward caution, and the wide spread means investors should treat the consensus target as a range, not a precise signal.
Bulls vs Bears: KBH Investment Factors
The bear case currently has stronger evidence, driven by a 22.6% revenue decline, gross margin compression from 20.43% to 15.69%, and a technical downtrend with -42.53% relative underperformance versus the S&P 500. The bull case rests on valuation support — 1.12x book value, 0.70x sales, and a $58.42 average analyst target implying +24% upside — plus the potential of the built-to-order model pivot. The single most important tension is whether housing demand and margins have bottomed: if the built-to-order model restores gross margins toward 20%, the stock could re-rate sharply, but if margins stay in the mid-teens, the dividend and buyback program becomes the next casualty. With a beta of 1.336 and a short ratio of 8.89 days, the stock is positioned for high volatility in either direction, and the wide analyst target range of $43–$77 reflects genuinely low conviction.
Bullish
- Analyst target implies 24% upside: The consensus average price target of $58.42 across 12 analysts represents roughly +24% upside from the current $47.12, and the high target of $77.00 implies +63%. Even the low target of $43.00 is only -9% below the current price, suggesting the downside skew is limited relative to the upside potential.
- Balance sheet provides downside cushion: KBH carries a debt-to-equity ratio of just 0.44 and a current ratio of 4.57, both healthy for a homebuilder, while generating $290.2 million in trailing free cash flow. The 1.57% dividend yield is covered by a payout ratio of only 15.99%, meaning the capital return program is not immediately at risk despite the earnings slump.
- Valuation near book value and historical lows: The stock trades at 1.12x price-to-book and 0.70x price-to-sales, near the low end of its historical PS band of 1.34x–3.70x. The trailing PE of 10.16x sits within the typical homebuilder range of 8–12x, and the EV/EBITDA of 9.90x is not stretched for a cyclical builder with land assets.
- Built-to-order pivot could restore margins: The June 24, 2026 stock jump showed investors are willing to reward the new built-to-order operating model narrative, which management believes will improve profitability. If this model lifts gross margins back toward the 20%+ levels seen in 2024, earnings could recover sharply from the depressed Q1 2026 EPS of $0.53.
Bearish
- Revenue collapsing at 22.6% year-over-year: Q1 fiscal 2026 revenue fell 22.62% to $1.077 billion from $1.392 billion a year earlier, with sequential erosion from $1.620 billion in Q3 2025 and $1.694 billion in Q4 2025. This multi-quarter decline reflects lower deliveries and selling prices, and the trend shows no sign of stabilizing.
- Gross margin compression is severe: Gross margin fell to 15.69% in Q1 2026 from 20.43% a year earlier and 17.37% in Q4 2025, while net margin collapsed to 3.10% from 7.87%. Operating margin compressed to 3.38% from 9.38%, signaling intense pricing pressure and elevated incentive costs that directly threaten profitability.
- Technical downtrend with negative momentum: The stock is down 27.52% over one year versus the S&P 500's +15.01%, a -42.53% relative strength gap, and sits just 4.5% above its 52-week low of $44.03. The 1-month decline of -16.45% is steeper than the 3-month decline of -13.06%, indicating accelerating selling pressure rather than stabilization.
- Earnings recovery is uncertain and back-loaded: Trailing EPS is just $0.098, yet analysts estimate forward EPS of $5.67 — a dramatic recovery that has not appeared in the numbers. The forward PE of 10.86x is above the trailing PE of 10.16x, implying the market expects earnings to decline further before recovering.
KBH Technical Analysis
KB Home is in a clear, sustained downtrend, with the current price of $47.12 sitting just 4.5% above its 52-week low of $44.03 and roughly 30% below its 52-week high of $67.57 — meaning the stock is trading at only about 30% of its 52-week range. The 1-year price change of -27.52% versus the S&P 500's +15.01% produces a staggering -42.53% relative strength gap, confirming this is a falling-knife setup rather than a value opportunity until a base forms. With a max drawdown of -33.74%, the stock has been in persistent distribution, and positioning this close to lows signals sellers remain in control.\n\nShort-term momentum is decisively negative and worsening: the 1-month change of -16.45% is steeper than the 3-month change of -13.06%, indicating the decline is accelerating rather than stabilizing. This 1-month weakness also diverges sharply from the 6-month change of -7.88%, meaning the most recent month accounts for the bulk of the recent damage — a bearish acceleration pattern, not a mean-reversion setup. Relative strength versus SPY is negative across every window (-15.49% over 1 month, -15.06% over 3 months, -29.13% YTD), and the elevated short ratio of 8.89 days suggests meaningful short positioning that could fuel squeezes but also reflects entrenched bearish conviction.\n\nKey technical levels are well defined: support sits at the 52-week low of $44.03, roughly 6.6% below the current $47.12, while resistance is the 52-week high at $67.57, about 43% above. A breakdown below $44.03 would signal a fresh leg lower and likely trigger momentum-driven selling, whereas reclaiming even the mid-$50s would be the first evidence of a trend change. With a beta of 1.336, KBH is roughly 34% more volatile than the market, meaning position sizing should be reduced accordingly — a 1% SPY move implies roughly a 1.34% KBH move, amplifying both downside risk in this downtrend and upside in any recovery.
Beta
1.34
1.34x market volatility
Max Drawdown
-33.7%
Largest decline past year
52-Week Range
$44-$68
Price range past year
Annual Return
-22.1%
Cumulative gain past year
| Period | KBH Return | S&P 500 |
|---|---|---|
| 1m | -12.2% | +1.0% |
| 3m | -21.0% | +5.5% |
| 6m | -6.4% | +19.9% |
| 1y | -22.1% | +16.0% |
| ytd | -14.9% | +13.4% |
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KBH Fundamental Analysis
KB Home's revenue trajectory has deteriorated sharply: Q1 fiscal 2026 revenue was $1.077 billion, down 22.62% year-over-year from $1.392 billion in Q1 fiscal 2025, and the multi-quarter trend shows sequential erosion from $1.620 billion in Q3 2025 and $1.694 billion in Q4 2025. The homebuilding segment generated $1.686 billion in the reported segment period, but the direction of travel is unmistakable — revenue has fallen in each of the last several quarters on lower deliveries and selling prices. This contraction implies the investment case now hinges entirely on a cyclical recovery and the built-to-order model pivot rather than near-term growth.\n\nProfitability remains positive but is compressing rapidly: Q1 2026 net income was $33.4 million with a gross margin of 15.69%, down from $109.6 million and 20.43% in Q1 2025, and from 17.37% in Q4 2025. The net margin has fallen to 3.10% in Q1 2026 from 7.87% a year earlier, while operating margin compressed to 3.38% from 9.38%. For a homebuilder, gross margins in the high teens are below the 20%+ levels KBH enjoyed in 2024, signaling pricing pressure and incentive costs; the company is still profitable, but the margin trajectory is the single most important fundamental risk.\n\nThe balance sheet is the relative bright spot: debt-to-equity of 0.44 is moderate for a homebuilder, the current ratio of 4.57 is very strong, and trailing free cash flow of $290.2 million supports the 1.57% dividend yield and buybacks. However, ROE has fallen to 10.99% and ROA to 3.39%, and the Q1 2026 cash flow statement showed a massive working-capital-driven swing with inventory building — the prior-year Q1 had negative operating cash flow of -$334 million. With a payout ratio of 15.99% and dividend coverage still adequate, KBH can fund operations internally, but if margins keep compressing, the capital return program that headlines flagged as at-risk becomes the key watch item.
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 — Q1 2026 net income of $33.4 million and trailing EPS of $0.098 — the PE ratio is the appropriate primary metric, and it currently stands at 10.16x trailing. The forward PE of 10.86x is actually slightly above the trailing figure, which is unusual and implies the market expects earnings to decline further before recovering, consistent with the 22.6% revenue drop and margin compression. The PEG ratio of -0.37 is negative and therefore not meaningful given the earnings contraction.\n\nOn peer comparison, KBH trades at a trailing PE of 10.16x and a price-to-book of 1.12x, with a price-to-sales of just 0.70x and EV/EBITDA of 9.90x. Homebuilders as a group typically trade in the 8–12x PE range, so KBH is roughly in line to slightly above the low end of the sector band, while its 0.70x PS ratio is low in absolute terms and reflects the depressed revenue base. The 1.12x price-to-book is near book value, which for a homebuilder with land holdings can represent a floor — but the discount is justified by the severe margin compression and negative growth, not by a durable competitive advantage.\n\nHistorically, KBH's PE has ranged from roughly 2.4x in late 2022 to nearly 30x in Q1 2026, and its PS ratio has ranged from about 1.34x to 3.70x. At 10.16x PE and 0.70x PS, the stock is near the low end of its own historical PS band but mid-range on PE because earnings have collapsed — a classic cyclical trap where the multiple looks reasonable only because the denominator is depressed. The market is pricing in a recovery that has not yet appeared in the numbers, and the 1.12x P/B suggests investors are assigning little value to future growth.
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
KB Home faces significant financial and operational risks. Revenue fell 22.62% year-over-year to $1.077 billion in Q1 fiscal 2026, with gross margin collapsing to 15.69% from 20.43% and net margin falling to 3.10% from 7.87%. The company's profitability is highly sensitive to pricing and incentive costs, and with trailing EPS of just $0.098, any further margin deterioration could push earnings toward zero. While the balance sheet is relatively solid with debt-to-equity of 0.44 and a current ratio of 4.57, the Q1 2026 cash flow statement showed a working-capital-driven swing with inventory building, and the prior-year Q1 had negative operating cash flow of -$334 million, highlighting the cyclical cash burn risk inherent in homebuilding.
Market and competitive risks are elevated. KBH trades at a trailing PE of 10.16x and price-to-book of 1.12x, which is near the low end of its historical PS band but mid-range on PE because earnings have collapsed — a classic cyclical trap. The stock's beta of 1.336 means it is roughly 34% more volatile than the market, amplifying downside in a housing downturn. Competitive pressure from larger builders with greater scale and land positions could force KBH to sacrifice margin to maintain volume, and the wide analyst target range of $43–$77 signals low conviction. Recent news highlights that the earnings slump puts dividends and buybacks at risk, and Raymond James downgraded the stock from Outperform to Market Perform in December 2025 with no subsequent upgrades.
The worst-case scenario involves a continued housing market downturn that forces further price cuts and incentive spending, pushing gross margins below 15% and net income toward breakeven. In this scenario, the dividend and buyback program would likely be reduced or suspended, removing a key support for the stock. The 52-week low of $44.03 represents a -6.6% decline from the current $47.12, while the analyst low target of $43.00 implies -8.7% downside. A more severe scenario, such as a recession that drives the stock below its 52-week low toward the $38–$40 range, would represent a -15% to -20% loss from current levels. Given the max drawdown of -33.74% over the past year, investors should be prepared for significant volatility.
FAQ
The most severe risk is continued margin compression: gross margin fell to 15.69% in Q1 2026 from 20.43% a year earlier, and a further decline below 15% would threaten profitability and the dividend. Second, the dividend and buyback program could be reduced or suspended, as recent headlines explicitly flag this risk given the 22.62% revenue decline and net income of just $33.4 million. Third, technical breakdown risk is high: the stock is only 4.5% above its 52-week low of $44.03, and a break below that level could trigger momentum-driven selling toward $38–$40. Fourth, macro sensitivity is elevated with a beta of 1.336, meaning KBH is 34% more volatile than the market, and high mortgage rates or a recession would further suppress housing demand. Finally, competitive pressure from larger builders could force KBH to sacrifice margin to maintain volume.
The 12-month forecast is divided into three scenarios. The base case (50% probability) targets $52–$62, assuming gross margins stabilize in the 16–18% range and revenue declines moderate, with the stock trading around the analyst average target of $58.42. The bull case (25% probability) targets $65–$77, driven by a faster margin recovery above 18%, lower mortgage rates, and the built-to-order model exceeding expectations, aligning with the analyst high target of $77.00. The bear case (25% probability) targets $38–$44, assuming margins fall below 15%, the dividend is cut, and the stock breaks below its 52-week low of $44.03 toward the analyst low target of $43.00. The most likely scenario is the base case, with the key assumption being that gross margins have bottomed and will stabilize rather than deteriorate further.
KBH presents a mixed valuation picture depending on the metric. On assets, it appears undervalued: price-to-book of 1.12x is near book value, and price-to-sales of 0.70x is at the low end of its historical range of 1.34x–3.70x. However, on earnings, the trailing PE of 10.16x is mid-range for homebuilders (typically 8–12x) and the forward PE of 10.86x is actually higher than trailing, implying the market expects earnings to decline further. The EV/EBITDA of 9.90x is also not cheap for a cyclical builder with declining revenue. The market is pricing in a recovery that has not yet appeared in the numbers, with forward EPS estimates of $5.67 versus trailing EPS of $0.098. Relative to its own history, KBH is cheap on sales but expensive on depressed earnings — a classic cyclical trap. Fair value is likely in the $50–$55 range until margin trends stabilize.
KBH is a high-risk, contrarian value play rather than a compelling buy at current levels. The stock trades at $47.12, just 4.5% above its 52-week low of $44.03, with a -42.53% relative underperformance versus the S&P 500 over one year. The analyst consensus is hold with an average target of $58.42 (+24% upside), but the wide range of $43–$77 and the lack of recent upgrades signal low conviction. The biggest downside risk is a break below $44.03, which could trigger momentum selling toward the analyst low target of $43.00 or lower. For risk-tolerant investors with a multi-year horizon who believe housing has bottomed, the risk/reward is asymmetric given the 1.12x book value and 0.70x sales valuation. However, for most investors, the collapsing earnings (trailing EPS $0.098) and margin compression (gross margin 15.69%) make it prudent to wait for evidence of a margin bottom before buying.
KBH is better suited for long-term, patient investors with a high risk tolerance than for short-term traders, though its high volatility (beta 1.336) and 8.89-day short ratio create short-term trading opportunities for nimble investors. The company is in a cyclical downturn with revenue down 22.62% and margins compressed, and the recovery depends on the built-to-order model and housing demand — a process that will take multiple quarters to play out. The 1.57% dividend yield and low 15.99% payout ratio provide some income support, but the dividend is not guaranteed if margins continue to fall. Earnings visibility is low, with trailing EPS of $0.098 versus forward estimates of $5.67, meaning the recovery is entirely back-loaded. A minimum holding period of 18–24 months is suggested to allow the cyclical recovery to materialize, and position sizing should be reduced given the elevated volatility.