Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, homebuilder KB Home (NYSE: KBH ) has received the dreaded one-star ranking.
With that in mind, let's take a closer look at KB Home's business and see what CAPS investors are saying about the stock right now.
KB Home facts
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Headquarters (Founded)
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Los Angeles (1957)
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Market Cap
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$1 billion
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Industry
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Homebuilding
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Trailing-12-Month Revenue
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$1.5 billion
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Management
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CEO Jeffrey Mezger (since 2006)
CFO Jeff Kaminski (since 2010)
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Return on Equity (Average, Past 3 Years)
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(33.9%)
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Cash/Debt
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$735.8 million / $1.7 billion
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Dividend Yield
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2.1%
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Competitors
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Lennar (NYSE: LEN )
PulteGroup (NYSE: PHM )
Toll Brothers (NYSE: TOL )
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Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.
On CAPS, 54.5% of the 1,227 members who have rated KB Home believe the stock will underperform the S&P 500 going forward. These bears include All-Star Chemdawg, who is ranked in the top 10% of our community, and kurtdabear.
Earlier this month, Chemdawg summed up the KB Home bear case:
[W]hat do you do when you build homes and no one needs one? ... you don't make much money thats for sure ... excess inventory will continue for awhile before builders will start to make any money again ... too many empty houses, too few buyers ... thats a bad formula.
Currently, KB Home even sports a debt-to-equity ratio of 3.3. That's much higher than fellow homebuilders like Lennar (1.2), Pulte (1.6), and Toll Brothers (0.6).
CAPS member kurtdabear expands on the underperform argument:
KBH got down under $5/sh. during the housing slump in the mid-90's, which was nowhere near as deep or long as the current decline. Based on recent public pronouncements, management still hasn't learned anything about how to keep their heads down and their powder dry in times of crisis. KBH has a long way to fall and may even fail to survive since the housing market promises to continue its decline for several more years.
What do you think about KB Home, or any other stock for that matter? If you want to retire rich, you need to protect your portfolio from any undue risk. Staying away from dangerous stocks is crucial to securing your financial future, and on Motley Fool CAPS, thousands of investors are working every day to flag them. CAPS is 100% free, so get started!
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