Hovnanian (HOV) Marked As A Barbarian At The Gate

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Hovnanian ( HOV) as a "barbarian at the gate" (strong stocks crossing above resistance with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified Hovnanian as such a stock due to the following factors:

  • HOV has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $20.2 million.
  • HOV has traded 3.1 million shares today.
  • HOV traded in a range 210.5% of the normal price range with a price range of $0.27.
  • HOV traded above its daily resistance level (quality: 13 days, meaning that the stock is crossing a resistance level set by the last 13 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Barbarian at the Gate' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying positive price action. In this case, the stock crossed an important inflection point; namely, 'resistance' while at the same time the range of the stock's movement in price is more than twice its normal size. This large range foreshadows a possible continuation as the stock moves higher.

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More details on HOV:

Hovnanian Enterprises Inc. designs, constructs, markets, and sells residential homes in the United States. Currently there is 1 analyst that rates Hovnanian a buy, 1 analyst rates it a sell, and 3 rate it a hold.

The average volume for Hovnanian has been 4.4 million shares per day over the past 30 days. Hovnanian has a market cap of $597.8 million and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 2.23 and a short float of 20.4% with 5.68 days to cover. Shares are down 31.4% year to date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Hovnanian as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, weak operating cash flow and poor profit margins.

Highlights from the ratings report include:
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Household Durables industry. The net income has significantly decreased by 75.6% when compared to the same quarter one year ago, falling from $34.68 million to $8.47 million.
  • Net operating cash flow has decreased to -$31.48 million or 41.73% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The gross profit margin for HOVNANIAN ENTRPRS INC is rather low; currently it is at 20.85%. Regardless of HOV's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 1.76% trails the industry average.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
  • HOVNANIAN ENTRPRS INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, HOVNANIAN ENTRPRS INC continued to lose money by earning -$0.49 versus -$2.88 in the prior year. This year, the market expects an improvement in earnings ($0.16 versus -$0.49).

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.
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