Hovnanian Enterprises (HOV) AI Stock Analysis

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Hovnanian Enterprises

(NYSE:HOV)

67Neutral

Hovnanian Enterprises enjoys a strong financial position, bolstered by revenue growth and solid cash management, despite macroeconomic and operational challenges. Technical indicators reflect a bearish trend, while the valuation suggests the stock is undervalued. The mixed sentiment from the earnings call highlights both growth potential and risks, resulting in a moderate overall stock score.

Hovnanian Enterprises (HOV) vs. S&P 500 (SPY)

Market Cap

$575.38M

Dividend YieldN/A

Average Volume (3M)86.52K

Price to Earnings (P/E)2.8

Beta (1Y)2.33

Revenue Growth8.88%

EPS Growth19.66%

CountryUS

Employees1,878

SectorConsumer Cyclical

Sector Strength55

IndustryResidential Construction

Share Statistics

EPS (TTM)32.50

Shares Outstanding5,195,302

10 Day Avg. Volume99,983

30 Day Avg. Volume86,523

Financial Highlights & Ratios

PEG Ratio0.14

Price to Book (P/B)N/A

Price to Sales (P/S)0.20

Price to Cash Flow (P/CF)-2.80

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$125.00

Price Target Upside38.69% Upside

Rating ConsensusModerate Sell

Number of Analyst Covering2

Hovnanian Enterprises Business Overview & Revenue Model

Company DescriptionHovnanian Enterprises, Inc. (HOV) is a leading national homebuilder based in the United States, primarily engaged in designing, constructing, and selling residential homes. The company operates through various segments, including homebuilding and financial services, offering a wide range of products from entry-level to luxury homes tailored to diverse market needs. Hovnanian is known for its commitment to quality, innovative design, and customer satisfaction, serving numerous communities across the country.

How the Company Makes MoneyHovnanian Enterprises generates revenue primarily through its homebuilding operations. The company makes money by constructing and selling residential homes, which include single-family homes, townhomes, and condominiums, across various geographic markets. Revenue is recognized when homes are delivered to customers and the closing process is completed. Additionally, Hovnanian offers financial services, including mortgage and title services, to facilitate home purchases, which also contributes to its earnings. The company's revenue streams are influenced by factors such as housing market conditions, economic trends, interest rates, and consumer preferences. Strategic partnerships with suppliers, subcontractors, and real estate professionals further support its operations and profitability.

Hovnanian Enterprises Financial Statement Overview

Summary

Hovnanian Enterprises exhibits a robust financial performance with strong revenue growth, profitability, and efficient cash management. The company shows a significant improvement in financial health with debt elimination and solid equity growth, contributing to a stable financial structure.

Income Statement

Very Positive

Hovnanian Enterprises shows strong financial performance with significant revenue growth over the trailing-twelve-months (TTM) compared to previous years. The gross profit margin stands at 37.02%, and the net profit margin at 7.99% for TTM, indicating efficient cost management and profitability. The EBIT and EBITDA margins are robust at 27.15% and 29.01% respectively, demonstrating healthy operating efficiency. The revenue growth rate is impressive at 10.97% from 2023 to 2024, highlighting a positive growth trajectory.

Balance Sheet

Positive

Hovnanian's balance sheet reflects a solid equity position with a total debt elimination in TTM, a significant improvement from previous years. The equity ratio is 32.03% in TTM, showing a stable financial structure. The return on equity (ROE) is strong at 30.35%, indicating effective utilization of equity to generate profits. However, there is a need to maintain this leverage balance to ensure long-term financial stability.

Cash Flow

Positive

The company's cash flow performance reveals a strong free cash flow position, with a substantial free cash flow growth rate of 606.48% from 2023 to 2024. The operating cash flow to net income ratio is 0.23, and the free cash flow to net income ratio is 0.17 for TTM, suggesting adequate cash generation relative to net income. The cash flow stability adds to the company's financial resilience despite fluctuations in operating cash flow.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
3.08B	3.00B	2.76B	2.92B	2.78B	2.34B
	Gross Profit
1.14B	601.79M	580.14M	643.43M	540.80M	372.21M
	EBIT
837.34M	259.56M	276.90M	368.43M	266.05M	140.56M
	EBITDA
343.96M	313.34M	283.75M	364.39M	271.39M	143.42M
	Net Income Common Stockholders
246.29M	242.01M	205.89M	225.49M	607.82M	50.93M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
367.18M	209.98M	434.12M	326.20M	245.97M	262.49M
	Total Assets
1.82B	2.61B	2.49B	2.56B	2.32B	1.83B
	Total Debt
1.74B	986.89M	1.14B	1.29B	1.37B	1.57B
	Net Debt
1.37B	776.92M	708.91M	965.15M	1.13B	1.30B
	Total Liabilities
2.16B	1.81B	1.91B	2.18B	2.15B	2.26B
	Stockholders Equity
-338.57M	800.35M	581.74M	383.04M	174.90M	-436.93M
Cash Flow		Free Cash Flow
40.85M	5.78M	416.45M	76.87M	204.27M	289.45M
	Operating Cash Flow
55.49M	23.64M	435.27M	89.47M	210.21M	292.83M
	Investing Cash Flow
-67.42M	-46.47M	-78.23M	-2.15M	9.00M	2.14M
	Financing Cash Flow
-83.23M	-187.93M	-261.71M	-16.52M	-217.27M	-167.77M

Hovnanian Enterprises Technical Analysis

Technical Analysis Sentiment

Negative

Last Price90.13

Price Trends

50DMA

112.56

Negative

100DMA

132.46

Negative

200DMA

160.42

Negative

Market Momentum

MACD

-2.95

Negative

RSI

41.91

Neutral

STOCH

22.66

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For HOV, the sentiment is Negative. The current price of 90.13 is below the 20-day moving average (MA) of 104.09, below the 50-day MA of 112.56, and below the 200-day MA of 160.42, indicating a bearish trend. The MACD of -2.95 indicates Negative momentum. The RSI at 41.91 is Neutral, neither overbought nor oversold. The STOCH value of 22.66 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for HOV.

Hovnanian Enterprises Risk Analysis

Hovnanian Enterprises disclosed 34 risk factors in its most recent earnings report. Hovnanian Enterprises reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Hovnanian Enterprises Peers Comparison

Overall Rating

UnderperformOutperform

Sector (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MHO	76 Outperform	$2.99B	5.60	20.66%	―	11.84%	21.14%
CCS	73 Outperform	$1.88B	5.90	13.33%	1.75%	18.17%	30.51%
TPH	72 Outperform	$2.78B	6.03	14.43%	―	20.93%	39.33%
HOV	67 Neutral	$575.38M	2.77	33.63%	―	8.88%	19.66%
BZH	61 Neutral	$612.83M	5.00	10.32%	―	12.27%	-22.28%
Sector *	59 Neutral	$11.76B	10.11	-0.70%	3.92%	1.27%	-16.30%
LGIH	50 Neutral	$1.41B	6.83	10.07%	―	-6.61%	-1.56%

* Consumer Cyclical Sector Average

Performance Comparison

HOV

Hovnanian Enterprises

90.13

-55.96

-38.31%

BZH

Beazer Homes

18.38

-10.70

-36.80%

MHO

M/I Homes

106.28

-12.04

-10.18%

TPH

Tri Pointe

29.10

-7.36

-20.19%

LGIH

LGI Homes

56.73

-42.74

-42.97%

CCS

Century Communities

59.32

-23.45

-28.33%

Hovnanian Enterprises Earnings Call Summary

Earnings Call Date: Feb 24, 2025 | % Change Since: -25.86% | Next Earnings Date: May 28, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed sentiment. On the positive side, the company demonstrated strong revenue growth, an increase in controlled lots, and a high return on investment. However, there were challenges such as lower-than-expected revenue guidance, a decline in gross margin due to increased incentives, and sales volatility. Utility and permitting delays further complicated the company's ability to meet its targets.

Highlights

Revenue and Profit Growth

Total revenues increased 13% to $674 million compared to last year's first quarter. Adjusted EBITDA for the quarter was $72 million, and adjusted pretax income was $41 million, both above the high end of the guidance range.

Strong Contract Growth

Contracts for the first quarter, including unconsolidated joint ventures, increased 9% year over year. Notably, November contracts increased 55% year over year.

Increase in Controlled Lots

The company ended the quarter with 43,254 controlled lots, a 29% increase year over year, indicating strong future growth potential.

High Return on Investment

The company's return on equity was 33%, and adjusted EBIT return on investment was 29.8%, one of the highest among peers.

Lowlights

Lower Revenue Guidance

Revenues were $674 million, near the low end of the guidance, due to about fifty fewer wholly-owned deliveries than expected and some delays due to utility hookups.

Decline in Gross Margin

Gross margin decreased year over year due to increased use of incentives, primarily mortgage rate buy downs.

Volatility in Sales

Sales activity was volatile, with a significant drop in January contracts by 10% year over year. Sales were also slower than expected in some months.

Utility and Permitting Delays

Delays in opening new communities were primarily related to utility hookups and permitting delays throughout the country.

Company Guidance

During Hovnanian Enterprises, Inc.'s fiscal 2025 first quarter earnings call, the company provided detailed guidance on various financial metrics. Revenue for the quarter was reported at $674 million, near the low end of their guidance due to fewer-than-expected wholly-owned deliveries, primarily affected by delays in utility hookups. The adjusted gross margin was 18.3%, near the high end of the guidance range, while SG&A expenses improved to 12.9% of total revenue, better than the low end of expectations. Income from unconsolidated joint ventures was $9 million, below guidance due to delivery delays in two joint venture communities. Adjusted EBITDA exceeded expectations at $72 million, and adjusted pretax income was $41 million, surpassing the high end of guidance. The company also highlighted a 13% year-over-year increase in total revenues, attributed to strong performance in Delaware and Northern Virginia markets, despite challenges in the West due to fires and utility delays. For the second quarter, Hovnanian expects revenues between $675 million and $775 million, with adjusted gross margins ranging from 17.5% to 18.5%, citing continued use of incentives like mortgage rate buy downs to combat affordability amidst high interest rates.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.