KBH - Embedded Expectations Analysis - 2019 07 30
KB Home (KBH:USA) currently trades near recent averages relative to UAFRS-based (Uniform) Assets, with a 1.2x Uniform P/B. At these levels, markets have bearish expectations for the firm, and management has concerns about the sustainability of recent net order volume and their pricing power.Specifically, management may be concerned about the sustainability of current mortgage rates and recent net order growth. Furthermore, management may be concerned about recent incentive growth and about the overall sustainability of current market conditions. Moreover, management may be concerned about their ability to maintain recent price increases, and they may lack confidence in their ability to meet their Q3 operating income margin guidance. Finally, management may be concerned about their ability to maintain current levels of interest amortization benefits, and they may be concerned about the sustainability of revenue from reactivated communities.
KB Home is a homebuilding company. The company builds a variety of homes designed primarily for first-time and first move-up, as well as second move-up and active adult homebuyers, including attached and detached single-family residential homes, townhomes and condominiums. The company's financial services operations provide various insurance products to its homebuyers in the markets where it builds homes and provide title services in certain of those markets. The company's financial services operations also provide mortgage banking services, including residential consumer mortgage loan originations, to its homebuyers indirectly through KBHS Home Loans, LLC, a joint venture the company formed with Stearns Lending, LLC.
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