The latest earnings results from KBH further reinforce our Bullish thesis, which sees the sustainable growth for the homebuilding activity over the next 1-2 years, fueled by the ongoing demand, falling price, and rate cuts from the Federal Reserve. With macro headwinds receding, we believe that the KBH story presently is the strongest it has been in the last 12-18 months.

Valuation

We believe that the 12x multiple is appropriate for KBH shares, particularly given the mid-teens top-line growth. When applied to our 2020 EPS estimate of $3.80, we get the target price of $46. When we analyze companies in the peer group, we see 12x multiple as fair to KBH shares. Further, regression analyses yield the 11-13x range. Therefore, we are quite comfortable with out 12x multiple.

READ FULL ARTICLE HERE