We recently compiled a list of the 7 Stocks That Could Surge From LA Wildfires Recovery Efforts. In this article, we are going to take a look at where KB Home (NYSE:KBH) stands against the other stocks.
Los Angeles wildfires continue to wreak havoc in the region, taking precious lives and destroying thousands of homes. The LA County Sheriff announced that nearly 10,000 structures were lost in the wildfires, but this number has already gone up and is expected to rise further as the authorities struggle to contain the fires.
Once the dust settles, there will be a huge demand for reconstruction of properties destroyed in the wildfires. The Biden administration has already promised federal reimbursements for the recovery efforts going on. Homebuilders could possibly benefit from this government support and the resulting spending surge as well.
To come up with the list of 7 stocks that could surge from LA wildfire recovery efforts, we considered stocks with a market cap of at least $4 billion.
An elevated view of a suburban neighborhood of newly built attached single-family residential homes.
KB Home (NYSE:KBH)
KB Home is one of those homebuilders that are poised to benefit from the industry-wide recovery expected in 2025. It is also the beneficiary of the housing under-supply, which has increased home prices, ultimately benefitting KBH. The company just confirmed this when it announced an earnings beat yesterday, causing the stock to soar after hours.
The firm’s revenues have grown at a CAGR of over 10% in the last 10 years. Its ROE has improved from 6.3% 8 years ago to 15.7% in 2023. However, investors should also note that the company’s gross margins are the second-lowest among its peers, so the improved ROE is still trailing most of its competitors. This will likely weigh on value realization in 2025, but the bull thesis still remains intact.
KB Home’s management is also actively buying back shares. Looking at it in the context of a monetary easing environment and a decrease in inflation, the housing market is set to make a comeback in 2025 and KB Home is ready to benefit from that.
Overall KBH ranks 4th on our list of the stocks that could surge from LA wildfires recovery efforts. While we acknowledge the potential of KBH as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as KBH but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
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