KB Home (KBH) Still Trading At Discount to Peers, MKM Reiterates Buy

January 24, 2013 11:31 AM EST
Get Alerts KBH Hot Sheet
Price: $16.35 +0.86%

Rating Summary:
    5 Buy, 20 Hold, 6 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 30 | Down: 30 | New: 23
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Yesterday evening KB Home (NYSE: KBH) announced that it has agreed to sell 5.5 million shares of its common stock at a public offering price of $18.25 per share. The company will also offer $200 million in aggregate principal amount of its 1.375% convertible senior notes due 2019.

Commenting on the development, Megan McGrath of MKM said, "We estimate that, pro forma for the common stock offering, KBH is trading at roughly 1.5x adjusted book value vs. the remainder of public homebuilders, trading at roughly 2.2x adjusted book value, on average."

While there may be some near-term weakness in KB Home stock following the capital raise, especially in light of a rally yesterday morning, McGrath is positive on the stock overall.

"We continue to believe that during 2013 KBH will be able to reduce the valuation discount it receives vs. its homebuilding peers by showing improved operating metrics including order growth and gross margins," added the analyst.

MKM updated its 2013 EPS estimate of $0.17. It also maintained a Buy rating and raised its price target on KB Home to $21.00 (from $18.00).

For an analyst ratings summary and ratings history on KB Home (NYSE: KBH) click here. For more ratings news on KB Home click here.

Shares of KB Home closed at $18.63 yesterday.

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