Investment Thesis
KB Home faces severe operational deterioration with 10% revenue decline paired with negative operating cash flow of -$93.5M, revealing that the business is burning cash despite positive accounting income. The combination of deeply negative free cash flow (-$116.4M), razor-thin net margins (2.8%), and minimal capital returns (ROE 1.6%, ROA 0.9%) indicates fundamental stress in the homebuilding segment.
Strengths
- Maintains positive operating income of $345.7M and respectable 15.8% operating margin despite revenue contraction
- Strong balance sheet with $200.8B cash reserves and minimal debt (0.00x Debt/Equity) provides financial flexibility
- Positive net income of $60.8M demonstrates the core business remains marginally profitable
Risks
- Negative operating cash flow of -$93.5M indicates core business is destroying cash, not generating it
- Negative free cash flow of -$116.4M is unsustainable and signals capital constraint ahead without intervention
- Revenue declining 10% YoY suggests market headwinds, pricing pressure, or demand weakness in housing sector
Key Metrics to Watch
- Operating cash flow trajectory - must return to positive to validate business sustainability
- Revenue stabilization and housing order backlog - early indicator of market recovery
- Cash burn rate and balance sheet adequacy - critical given negative FCF
Financial Metrics
Revenue
2.2B
Net Income
60.8M
EPS (Diluted)
$0.96
Free Cash Flow
-116.4M
Total Assets
6.8B
Cash
200.8M
Profitability Ratios
Gross Margin
11.0%
Operating Margin
15.8%
Net Margin
2.8%
ROE
1.6%
ROA
0.9%
FCF Margin
-5.3%
Balance Sheet & Liquidity
Current Ratio
N/A
Quick Ratio
N/A
Debt/Equity
0.00x
Debt/Assets
0.0%
Interest Coverage
N/A
Long-term Debt
N/A
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-07-29T06:07:29.104404 |
Data as of: 2026-05-31 |
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