When you look at NYSE:KBH, it's hard to ignore the strong fundamentals, especially considering its likely undervaluation.

Our stock screening tool has pinpointed KB HOME (NYSE:KBH) as an undervalued stock. NYSE:KBH maintains a solid financial footing. Furthermore, it remains attractively priced. Let's delve into the specifics below.

Understanding NYSE:KBH's Valuation

ChartMill employs its own Valuation Rating system for all stocks. This score, ranging from 0 to 10, is determined by evaluating different valuation factors, including price to earnings and free cash flow, both in absolute terms and relative to the market and industry. NYSE:KBH has earned a 8 for valuation:

• The Price/Earnings ratio is 9.42, which indicates a very decent valuation of KBH.
• 71.21% of the companies in the same industry are more expensive than KBH, based on the Price/Earnings ratio.
• The average S&P500 Price/Earnings ratio is at 28.20. KBH is valued rather cheaply when compared to this.
• The Price/Forward Earnings ratio is 8.09, which indicates a very decent valuation of KBH.
• Compared to the rest of the industry, the Price/Forward Earnings ratio of KBH indicates a rather cheap valuation: KBH is cheaper than 80.30% of the companies listed in the same industry.
• When comparing the Price/Forward Earnings ratio of KBH to the average of the S&P500 Index (20.02), we can say KBH is valued rather cheaply.
• 63.64% of the companies in the same industry are more expensive than KBH, based on the Enterprise Value to EBITDA ratio.
• Based on the Price/Free Cash Flow ratio, KBH is valued cheaper than 87.88% of the companies in the same industry.
• The low PEG Ratio(NY), which compensates the Price/Earnings for growth, indicates a rather cheap valuation of the company.
• KBH has a very decent profitability rating, which may justify a higher PE ratio.

How do we evaluate the Profitability for NYSE:KBH?

ChartMill assigns a Profitability Rating to every stock. This score ranges from 0 to 10 and evaluates the different profitability ratios and margins, both absolutely, but also relative to the industry peers. NYSE:KBH scores a 6 out of 10:

• The Return On Assets of KBH (8.96%) is better than 72.73% of its industry peers.
• Looking at the Return On Equity, with a value of 15.42%, KBH is in the better half of the industry, outperforming 71.21% of the companies in the same industry.
• KBH has a better Return On Invested Capital (10.10%) than 65.15% of its industry peers.
• KBH has a Profit Margin of 9.22%. This is in the better half of the industry: KBH outperforms 72.73% of its industry peers.
• In the last couple of years the Profit Margin of KBH has grown nicely.
• KBH's Operating Margin of 11.45% is fine compared to the rest of the industry. KBH outperforms 65.15% of its industry peers.
• In the last couple of years the Operating Margin of KBH has grown nicely.
• In the last couple of years the Gross Margin of KBH has grown nicely.

Evaluating Health: NYSE:KBH

ChartMill employs its own Health Rating for stock assessment. This rating, ranging from 0 to 10, is calculated by examining various liquidity and solvency ratios. In the case of NYSE:KBH, the assigned 7 reflects its health status:

• KBH has an Altman-Z score of 4.20. This indicates that KBH is financially healthy and has little risk of bankruptcy at the moment.
• With a decent Altman-Z score value of 4.20, KBH is doing good in the industry, outperforming 68.18% of the companies in the same industry.
• KBH has a debt to FCF ratio of 1.73. This is a very positive value and a sign of high solvency as it would only need 1.73 years to pay back of all of its debts.
• KBH has a Debt to FCF ratio of 1.73. This is in the better half of the industry: KBH outperforms 74.24% of its industry peers.
• KBH has a Debt/Equity ratio of 0.44. This is a healthy value indicating a solid balance between debt and equity.
• KBH has a Current Ratio of 5.91. This indicates that KBH is financially healthy and has no problem in meeting its short term obligations.
• KBH's Current ratio of 5.91 is amongst the best of the industry. KBH outperforms 80.30% of its industry peers.

Growth Assessment of NYSE:KBH

To evaluate a stock's growth potential, ChartMill utilizes a Growth Rating on a scale of 0 to 10. This comprehensive assessment considers various growth aspects, including historical and estimated EPS and revenue growth. NYSE:KBH has achieved a 4 out of 10:

• Measured over the past years, KBH shows a very strong growth in Earnings Per Share. The EPS has been growing by 20.25% on average per year.
• The Earnings Per Share is expected to grow by 11.59% on average over the next years. This is quite good.

Every day, new Decent Value stocks can be found on ChartMill in our Decent Value screener.

Check the latest full fundamental report of KBH for a complete fundamental analysis.

Keep in mind

This article should in no way be interpreted as advice. The article is based on the observed metrics at the time of writing, but you should always make your own analysis and trade or invest at your own responsibility.