Hovnanian Enterprises' (NYSE:HOV) earnings growth rate lags the 58% CAGR delivered to shareholders

While Hovnanian Enterprises, Inc. (NYSE:HOV) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 11% in the last quarter. But that doesn't change the fact that the returns over the last half decade have been spectacular. Indeed, the share price is up a whopping 874% in that time. So it might be that some shareholders are taking profits after good performance. But the real question is whether the business fundamentals can improve over the long term. Anyone who held for that rewarding ride would probably be keen to talk about it.

Although Hovnanian Enterprises has shed US$58m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

Check out our latest analysis for Hovnanian Enterprises

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Over half a decade, Hovnanian Enterprises managed to grow its earnings per share at 59% a year. That makes the EPS growth particularly close to the yearly share price growth of 58%. This indicates that investor sentiment towards the company has not changed a great deal. Indeed, it would appear the share price is reacting to the EPS.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Hovnanian Enterprises' key metrics by checking this interactive graph of Hovnanian Enterprises's earnings, revenue and cash flow.

A Different Perspective

It's good to see that Hovnanian Enterprises has rewarded shareholders with a total shareholder return of 124% in the last twelve months. That gain is better than the annual TSR over five years, which is 58%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Hovnanian Enterprises is showing 2 warning signs in our investment analysis , you should know about...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.