Today's Perilous Reversal Stock: Hovnanian (HOV)

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 "perilous reversal" (up big yesterday but down big today) 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 $20.3 million.
  • HOV has traded 2.5 million shares today.
  • HOV is down 3% today.
  • HOV was up 5.8% yesterday.

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More details on HOV:

Hovnanian Enterprises, Inc. designs, constructs, markets, and sells residential homes in the United States. It constructs single-family detached homes, attached townhomes and condominiums, urban infill, and active adult homes. HOV has a PE ratio of 71.6. Currently there is 1 analyst that rates Hovnanian a buy, 1 analyst rates it a sell, and 2 rate it a hold.

The average volume for Hovnanian has been 2.6 million shares per day over the past 30 days. Hovnanian has a market cap of $656.2 million and is part of the industrial goods sector and materials & construction industry. The stock has a beta of 2.33 and a short float of 10.8% with 3.06 days to cover. Shares are down 19.9% year-to-date as of the close of trading on Friday.

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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 generally disappointing historical performance in the stock itself, unimpressive growth in net income, weak operating cash flow, poor profit margins and feeble growth in its earnings per share.

Highlights from the ratings report include:
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 28.78%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 600.00% compared to the year-earlier quarter. Despite the heavy decline in its share price, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry.
  • 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 699.5% when compared to the same quarter one year ago, falling from $1.32 million to -$7.90 million.
  • Net operating cash flow has significantly decreased to -$55.05 million or 153.76% 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 20.44%. 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 -1.75% trails the industry average.
  • 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. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, HOVNANIAN ENTRPRS INC turned its bottom line around by earning $0.20 versus -$0.49 in the prior year. For the next year, the market is expecting a contraction of 37.5% in earnings ($0.13 versus $0.20).

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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