Stock Analysis

Hovnanian Enterprises' (NYSE:HOV) underlying earnings growth outpaced the respectable return generated for shareholders over the past three years

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NYSE:HOV
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It hasn't been the best quarter for Hovnanian Enterprises, Inc. (NYSE:HOV) shareholders, since the share price has fallen 18% in that time. But don't let that distract from the very nice return generated over three years. To wit, the share price did better than an index fund, climbing 87% during that period.

While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

Though if you're not interested in researching what drove HOV's performance, we have a free list of interesting investing ideas to potentially inspire your next investment!

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Hovnanian Enterprises was able to grow its EPS at 215% per year over three years, sending the share price higher. The average annual share price increase of 23% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time. This cautious sentiment is reflected in its (fairly low) P/E ratio of 1.21.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
NYSE:HOV Earnings Per Share Growth September 27th 2022

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

A Different Perspective

We regret to report that Hovnanian Enterprises shareholders are down 65% for the year. Unfortunately, that's worse than the broader market decline of 23%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. For example, we've discovered 3 warning signs for Hovnanian Enterprises (1 shouldn't be ignored!) that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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

Valuation is complex, but we're helping make it simple.

Find out whether Hovnanian Enterprises is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

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About NYSE:HOV

Hovnanian Enterprises

Hovnanian Enterprises, Inc. engages in the design, construction, marketing, and sale of residential homes in the United States.

The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.

Analysis AreaScore (0-6)
Valuation4
Future Growth0
Past Performance2
Financial Health4
Dividends0

Read more about these checks in the individual report sections or in our analysis model.

Good value with adequate balance sheet.