Since July 2025, KB Home has been in a holding pattern, posting a small return of 4.1% while floating around $55.41. The stock also fell short of the S&P 500’s 11.5% gain during that period.

Is now the time to buy KB Home, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.

Why Do We Think KB Home Will Underperform?

We're swiping left on KB Home for now. Here are three reasons there are better opportunities than KBH and a stock we'd rather own.

1. Backlog Declines as Orders Drop

Investors interested in Home Builders companies should track backlog in addition to reported revenue. This metric shows the value of outstanding orders that have not yet been executed or delivered, giving visibility into KB Home’s future revenue streams.

KB Home’s backlog came in at $1.40 billion in the latest quarter, and it averaged 21.6% year-on-year declines over the last two years. This performance was underwhelming and shows the company is not winning new orders. It also suggests there may be increasing competition or market saturation.

2. EPS Took a Dip Over the Last Two Years

Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.

Sadly for KB Home, its EPS declined by more than its revenue over the last two years, dropping 4.1%. This tells us the company struggled to adjust to shrinking demand.

3. New Investments Fail to Bear Fruit as ROIC Declines

A company’s ROIC, or return on invested capital, shows how much operating profit it makes compared to the money it has raised (debt and equity).

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, KB Home’s ROIC has unfortunately decreased. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Final Judgment

We cheer for all companies making their customers lives easier, but in the case of KB Home, we’ll be cheering from the sidelines. With its shares lagging the market recently, the stock trades at 13.5× forward P/E (or $55.41 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. There are superior stocks to buy right now. We’d recommend looking at a top digital advertising platform riding the creator economy.

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