How much a stock’s price changes over time is an important factor for most investors. Not only can price performance affect your portfolio, it can help you compare investment performance across sectors and industries.
Fear of missing out, or FOMO, also plays a factor in investing, particularly in particular tech giants as well as popular consumer-focused stocks.
What if you had invested in KB Home (KBH) ten years ago? It may not have been easy to hold on to KBH all this time, but if you did, how much would your investment be worth today?
Deep business of KB Home
With that in mind, let’s look at the key drivers of KB Home’s business.
Based in Los Angeles, California, KB Home is a well-known homebuilder in the United States and one of the largest in the state. The company’s revenue is generated from residential construction (which accounts for 99.7% of total revenue for fiscal 2022) and financial services (0.3%).
The company’s homebuilding operations include building and designing homes that serve first-time buyers, movers and active senior homebuyers on acquired or developed land. KB Home also builds attached and detached single-family homes, townhomes and co-ops.
There are four primary reporting segments within the Residential Construction reporting segment based on geographic presence: West Coast (includes Washington and California), Southwest (includes Arizona and Nevada), Central (includes Colorado and Texas), and Southeast (includes Florida, North Carolina).
KB Home’s financial services operations offer mortgage banking, title and insurance services to home buyers. This segment earns revenue primarily from insurance commissions and the provision of property services.
KB Home ended the third quarter of fiscal 2023 with $612.1 million in cash and cash equivalents, compared to $328.5 million at the end of fiscal 2022. It has total liquidity of $1.7 billion, including $1.08 billion on hand capacity under the unsecured revolving credit facility, net of cash borrowings outstanding. The company ended the quarter with a debt-to-equity ratio of 30.6%, down from 33.4% in fiscal 2022. It also repurchased approximately 1.5 million shares of its outstanding common stock for $82.5 million .
Anyone can invest, but building a successful investment portfolio requires a combination of several things: research, patience, and a little risk. So if you invested in KB Home a decade ago, you’re probably feeling pretty good about your investment today.
According to our calculations, a $1,000 investment made in November 2013 would be worth $2,943.37, or a 194.34% gain, as of November 3, 2023, and this return excludes dividends but includes price increases.
In comparison, the S&P 500 gained 145.10% and the price of gold rose 45.03% during the same time period.
Looking ahead, analysts expect more upside for KBH.
Shares of KB Homes have outperformed their industry over the past six months. The company’s growth is driven by its return-focused growth plan, which includes executing on its core business strategy, improving asset performance and monetizing significant deferred tax assets. It remains well-positioned to meet its full-year revenue expectations, supported by a $3.4 billion end value backlog, a larger number of communities, a built-to-order model and expectations for continued current housing market conditions through the end of 2023. Also, KBH’s robust land acquisition strategies are helping it increase gross margin and returns. Fiscal 2023 earnings estimates have moved north over the past 30 days, reflecting analysts’ optimism. Still, continued interest rate hikes and a high-cost environment are cause for concern.
The stock is up 10.79% over the past four weeks, and there have been 7 upward revisions to fiscal 2023 earnings estimates compared to no downward revisions in the past two months. The consensus estimate has also risen.
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