NEW YORK (TheStreet) -- Shares of Hovnanian Enterprises (HOV - Get Report) are surging higher by 15.82% to $1.83 in mid-morning trading on Tuesday, as home building stocks get a boost one day after the release of data showing positive sentiment for the sector.
On Monday, the National Association of Home Builders said sentiment for August rose by 1 point to 61, its highest level since November 2005.
Any reading above 50 is considered positive, CNBC.com reports.
"Today's report is consistent with our forecast for a gradual strengthening of the single-family housing sector in 2015. Job and economic gains should keep the market moving forward at a modest pace throughout the rest of the year," NAHB Chief Economist David Crowe told CNBC.com.
Hovnanian Enterprises is a Red Bank, NJ-based designer, constructor, marketer and seller of single family detached homes, attached townhomes and condominiums and also operates a financial services segment.
Separately, TheStreet Ratings team rates HOVNANIAN ENTRPRS INC as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate HOVNANIAN ENTRPRS INC (HOV) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, poor profit margins, weak operating cash flow, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- 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 147.5% when compared to the same quarter one year ago, falling from -$7.90 million to -$19.56 million.
- The gross profit margin for HOVNANIAN ENTRPRS INC is rather low; currently it is at 15.80%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -4.17% trails that of the industry average.
- Net operating cash flow has declined marginally to -$60.51 million or 9.91% when compared to the same quarter last year. Despite a decrease in cash flow of 9.91%, HOVNANIAN ENTRPRS INC is still significantly exceeding the industry average of -103.90%.
- Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 60.11%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 160.00% compared to the year-earlier quarter. Turning toward the future, the fact that the stock has come down in price over the past year should not necessarily be interpreted as a negative; it could be one of the factors that may help make the stock attractive down the road. Right now, however, we believe that it is too soon to buy.
- 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 increased its bottom line by earning $1.84 versus $0.20 in the prior year. For the next year, the market is expecting a contraction of 106.0% in earnings (-$0.11 versus $1.84).
- You can view the full analysis from the report here: HOV Ratings Report