BEKE

We rate KE Holdings Inc. (BEKE) as a Reduce with a composite score of 48.8/100 at a current price of $17.09. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in quality (82th percentile) and value (65th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (22th percentile) and stability (36th percentile) tempers our overall conviction. We assign a Narrow Moat rating (53/100), Low uncertainty, and Exemplary capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

KE Holdings Inc. holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 48.8/100 places it at rank #2194 in our full 7,333-stock universe. With a $43.2B market capitalization, KE Holdings Inc. operates at meaningful scale within the Finance, Insurance, And Real Estate sector, providing competitive advantages in distribution, procurement, and customer reach.

Revenue is growing at 17%, though momentum at the 22th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 25% (-52.0pp vs sector) narrow to operating margins of 4% (-13.0pp vs sector) and net margins of 4.4%, yielding a gross-to-net conversion rate of 18%. This conversion rate is typical for the sector, suggesting a standard cost structure without notable efficiency advantages or disadvantages.

At a current price of $17.09, KE Holdings Inc. is trading near fair value based on current fundamentals. Our value factor score of 65/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 103.6x (a 769% premium to the sector median of 11.9x), EV/EBITDA of 4.9x (discounted to peers), P/B of 2.0x, P/S of 0.4x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Low uncertainty rating to KE Holdings Inc.. The company exhibits strong financial stability with a beta of 0.65, conservative leverage (0% D/E), and a stability factor in the 36th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: below-average price stability (36th percentile); low beta of 0.65 — while defensive, this may indicate limited upside participation in bull markets; elevated valuation multiple (P/E 103.6x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 36th percentile and quality factor at the 82th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: conservative leverage (0% D/E) limits balance sheet risk; a 2.89% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate KE Holdings Inc.'s capital allocation as Exemplary. Management demonstrates a strong track record of balancing reinvestment with shareholder returns, evidenced by returns on equity of 22.9%, disciplined leverage (0% D/E), a 2.89% dividend yield. Exemplary allocators typically generate returns on equity above 20% while maintaining debt-to-equity below 50% — KE Holdings Inc. meets this high bar.

The balance sheet remains conservatively managed, providing financial flexibility for opportunistic investments while maintaining a margin of safety for shareholders. The company returns capital via a 2.89% dividend yield, and the combination of 12.3% return on assets and controlled leverage suggests management is deploying capital at rates well above the cost of capital — the hallmark of exemplary stewardship.

In summary, KE Holdings Inc. receives a Reduce rating with a composite score of 48.8/100 (rank #2194 of 7,333). Our quantitative framework assigns a Narrow Moat (53/100, trend: stable), Low uncertainty, and Exemplary capital allocation. The average factor score across quality, value, momentum, stability, and investment is 51/100.

Our analysis does not support a constructive view on KE Holdings Inc. at this time. The combination of the current quantitative profile, low uncertainty, and exemplary capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.