KBH

KBH screens optically cheap at 10x trailing diluted EPS of $6.15 and 0.6x sales, with an 11% ROE and a fortress-ish balance sheet ($3.90B equity, $3.63B retained earnings). The story, however, is decelerating: FY2025 revenue fell 10% to $6.24B and net income dropped 34.5% to $429M, driven by what management explicitly attributes in the MD&A to 'tepid consumer confidence,' 'affordability challenges and persistently elevated mortgage loan interest rates,' and a deliberate 'simplified sales strategy' of cutting base prices to stimulate demand. The numbers corroborate the narrative — housing gross margin compressed from 21.0% to 18.6%, net orders fell 11% to 11,596, ASP of net orders dropped 6% to $463,200, and homebuilding operating margin collapsed from 11.1% to 8.2%.

What keeps this from being a sell is capital return and capital discipline. The company repurchased $541M of stock in FY2025 (up 53% YoY), shrinking the share count 12.4%, and the board reloaded the authorization to $1.00B in October 2025, leaving $900M available as of November 30, 2025. That buyback is the single biggest reason diluted EPS held up better than net income (-27% vs -35%). Approximately 50% of 2025 deliveries went to first-time buyers, a segment most exposed to mortgage-rate relief — so the same factor pressuring margins now becomes an asymmetric tailwind if rates ease.