KBH
KB Home
$48.60
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Strong
·
Conviction
Undervalued
Trading 47.1% below fair value
You pay
$48.60
Bear
$67.43
Fair
$91.94
Bull
$116.46
Bear
$67.43
+38.7%
$7.03 × 14x + net cash
Fair
$91.94
+89.2%
$7.03 × 18x + net cash
Bull
$116.46
+139.6%
$7.03 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($7.03)
Implied Market Multiple
6.9x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $60.43 from 43 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $91.94 per share.
Warnings
This company has a built-in lending arm whose debt is mixed in with the main business. We capped the debt adjustment to avoid overstating what the core business owes.
Wall Street's average price target is $60.43 (from 43 analysts). Our estimate is 74% above the consensus -- consider that gap carefully.
Key Risks
- Standard 10-year DCF produces unreliable terminal values for cyclicals
- 'Cheap' P/E at cycle peak is the most common value trap — normalize first
- Captive finance subsidiaries have different risk profiles from manufacturing