Interest rates are still hovering near record highs and inflation has many consumers pulling back on spending. So why are some homebuilder stocks surging? The latest inflation numbers are down from the peak. And that has some prospective homebuyers betting that trend will continue amid a housing shortage. On Wednesday, the Relative Strength Rating for homebuilder KB Home rose to 71, up from 68. The upgraded 71 RS Rating means KB Home stock is outperforming 71% of all stocks, regardless of industry group.
It's a good but not yet great rating for the stock watchlist candidate. Market research shows that the best-performing stocks tend to have an 80 or better RS Rating as they begin their largest price moves. See if KB Home can continue to rebound and clear that threshold. It's important to note, however, its other ratings are stellar.
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KB Home's Other Key Ratings Shine
The homebuilder boasts a best-possible 99 Earnings Per Share Rating, showing its profit growth is in the top 1% of all companies amid high double-digit quarterly growth. It also has a strong 95 Composite Rating, out of 99, and a B Accumulation/Distribution Rating on an A+ to E scale. The B A/D Rating shows that institutional investors like ETFs and insurance funds are buying more shares than selling.
KB Home stock has been rising lately. It's up about 28% from a Sept. 27 low at 25.30. Tuesday afternoon, it was trading above 32 up about 3% for the day. Shares of the Los Angeles builder of single-family homes, townhomes and condominiums haven't formed a clear pattern yet. While it's not currently an ideal time to jump in, see if the stock manages to form a chart pattern and break out.
Earnings soared 79% on a year-over-year basis, to $2.86 per share, compared to 55% growth in the prior report. Revenue grew 26% to $1.845 billion, increased from 19% growth a quarter earlier. Keep an eye out for the company's next round of numbers on or around Jan. 11.
Peers In Homebuilders Group
KB Home stock holds the No. 7 rank among its peers in the Building-Residential/Commercial industry group. NVR and PulteGroup are among the group's highest-rated stocks. The group itself ranks a respectable 59 on IBD's list of 197 industry groups.
When looking for the best stocks to buy and watch, one factor to watch closely is relative price strength.
IBD's proprietary Relative Strength Rating measures market leadership with a 1 (worst) to 99 (best) score. The score shows how a stock's price behavior over the last 52 weeks stacks up against all the other stocks in our database.
