KBH
KB Home
$56.13
Cyclical & Capital-Intensive
80%
Normalized Earnings × Cycle Multiple
Moderate
·
Conviction
Undervalued
Trading 39.1% below fair value
You pay
$56.13
Bear
$67.55
Fair
$92.11
Bull
$116.68
Bear
$67.55
+20.3%
$7.03 × 14x + net cash
Fair
$92.11
+64.1%
$7.03 × 18x + net cash
Bull
$116.68
+107.9%
$7.03 × 22x + net cash
Key Value Driver
Through-cycle normalized EPS ($7.03)
Implied Market Multiple
8.0x
Summary
Our base-case estimate uses Normalized Earnings × Cycle Multiple. We then blend that result with the average analyst price target of $61.00 from 44 analysts, using a 30% weight on analyst consensus. That produces an estimated intrinsic value of $92.11 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 $61.00 (from 44 analysts). Our estimate is 73% 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