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1. Company Snapshot

1.a. Company Description

Hovnanian Enterprises, Inc.engages in the design, construction, marketing, and sale of residential homes in the United States.It offers single-family detached homes, attached townhomes and condominiums, urban infill, and active lifestyle homes with amenities, such as clubhouses, swimming pools, tennis courts, tot lots, and open areas.


The company markets and builds homes for first-time buyers, first-time and second-time move-up buyers, luxury buyers, active lifestyle buyers, and empty nesters.It also provides mortgage loans and title insurance services.The company was founded in 1959 and is headquartered in Matawan, New Jersey.

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1.b. Last Insights on HOV

Here is a 90-word analysis of the negative drivers behind Hovnanian Enterprises' recent stock performance: Despite strong Q4 growth, Hovnanian's Q1 earnings were pressured by rising incentives, which led to a decline in margins. The company's backlog also decreased amid shifting market dynamics. Additionally, high-interest rates pose short-term risks, which could impact housing demand. While the company's strategic focus on contracts and land expansion has driven growth, these headwinds may continue to weigh on its performance.

1.c. Company Highlights

2. Hovnanian Enterprises Beats Expectations with Strong Q3 Results

Hovnanian Enterprises reported revenues of $801 million for the third quarter of fiscal 2025, an 11% year-over-year increase driven by higher deliveries. Adjusted gross margin was 17.3%, down from the previous year due to increased incentives for affordability. The company's earnings per share (EPS) was $1.99, missing analyst estimates of $3.51. SG&A ratio improved by 110 basis points to 11.3% year-over-year. The company's adjusted EBITDA was $77 million, and adjusted pretax income was $40 million.

Publication Date: Aug -28

📋 Highlights
  • Revenue Growth:: Revenues increased 11% YoY to $801 million driven by higher home deliveries.
  • Gross Margin Pressure:: Adjusted gross margin declined to 17.3% YoY due to affordability incentives.
  • Operational Efficiency:: SG&A ratio improved 110 bps YoY to 11.3%, reflecting cost discipline.
  • Lot Supply Strategy:: 40,246 controlled lots (7-year supply) with 2% YoY growth and 36% growth from 2023.
  • Financial Strength:: $278 million liquidity and net debt-to-net-cap ratio reduced to 47.9% (vs. 146.2% in 2020).

Operational Highlights

The company ended the quarter with 146 open-for-sale communities, 124 of which were wholly owned. Hovnanian opened 25 new wholly owned communities and sold out of 26 wholly owned communities during the quarter. The company is experiencing delays in opening new communities due to utility hookups and permitting delays. As Ara Hovnanian mentioned, "We're focusing on pace over price, which has resulted in an above-average number of contracts per community compared to our peers."

Land Acquisition and Supply

Hovnanian ended the quarter with 40,246 controlled lots, a 7-year supply. The company's lot count increased 2% year-over-year but decreased sequentially for the second quarter in a row. The company added 3,500 lots in 30 future communities during the quarter but walked away from 4,059 lots. Hovnanian is working with land sellers to find compromises in the slow market and is finding new land opportunities that meet its return hurdles.

Balance Sheet and Liquidity

The company ended the quarter with $278 million of liquidity, above its targeted range. Hovnanian paid off $27 million of its highest-cost debt, improving its maturity ladder and reducing interest costs. The company's net debt-to-net-cap ratio improved to 47.9% from 146.2% at the beginning of fiscal 2020. With a return on equity (ROE) of 19% and an adjusted EBITDA return on investment among the highest among its peers, the company's financial health is robust.

Valuation and Outlook

Given the current valuation metrics, with a P/E Ratio of 5.63, P/B Ratio of 1.07, and ROE of 19.45%, it appears that Hovnanian's stock may be undervalued relative to its peers. The company expects total revenues for the fourth quarter to be between $750 million and $850 million, with adjusted gross margin expected to be between 15% and 16.5%. Analysts estimate revenue growth of 6.7% for the next year, indicating a positive outlook for the company.

3. NewsRoom

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Hovnanian Enterprises Swings to Loss as Hesitant Homebuyers Squeeze Margins

Dec -04

Source: wsj.com

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Hovnanian Enterprises, Inc. (HOV) Q4 2025 Earnings Call Transcript

Dec -04

Source: seekingalpha.com

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Hovnanian (HOV) Surpasses Q4 Earnings and Revenue Estimates

Dec -04

Source: zacks.com

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Hovnanian Enterprises Logs Loss on Higher Costs, Tighter Margins

Dec -04

Source: wsj.com

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Hovnanian Enterprises Reports Fourth Quarter and Fiscal Year 2025 Results

Dec -04

Source: globenewswire.com

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Reviewing OFA Group (NASDAQ:OFAL) & Hovnanian Enterprises (NYSE:HOV)

Dec -01

Source: defenseworld.net

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Hovnanian Enterprises Announces Fiscal Year 2025 Earnings Release and Conference Call

Nov -20

Source: globenewswire.com

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Teacher Retirement System of Texas Has $1.58 Million Position in Hovnanian Enterprises Inc $HOV

Nov -05

Source: defenseworld.net

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.71%)

6. Segments

Homebuilding

Expected Growth: 4.65%

Hovnanian Enterprises, Inc.'s 4.65% growth in Homebuilding is driven by increasing demand for new homes, fueled by low interest rates and a strong job market. Additionally, the company's focus on affordable pricing, strategic land acquisition, and cost-saving initiatives have contributed to its growth. Furthermore, the company's expansion into new markets and diversification of product offerings have also supported its growth momentum.

Financial Services

Expected Growth: 7.4%

Hovnanian Enterprises, Inc.'s 7.4% growth in Financial Services is driven by increasing demand for mortgage banking services, expansion of financial product offerings, and strategic partnerships. Additionally, the company's focus on digital transformation and process efficiencies has improved operational scalability, contributing to the segment's growth.

Corporate and Unallocated

Expected Growth: 4.83%

Hovnanian Enterprises, Inc.'s Corporate and Unallocated segment growth of 4.83% is driven by effective cost management, improved operational efficiencies, and strategic investments in technology. Additionally, the company's focus on community development and land acquisition has contributed to the growth, along with favorable market conditions and a strong demand for housing.

7. Detailed Products

Single-Family Homes

Hovnanian Enterprises, Inc. builds and sells single-family homes in various communities across the United States.

Townhomes

The company also builds and sells townhomes, offering a more affordable and low-maintenance option for homebuyers.

Condominiums

Hovnanian Enterprises, Inc. develops and sells condominiums, offering a range of amenities and services to residents.

Active Adult Communities

The company builds and sells homes in active adult communities, designed for residents 55 and older.

Resort-Style Communities

Hovnanian Enterprises, Inc. develops and sells homes in resort-style communities, offering luxurious amenities and services.

8. Hovnanian Enterprises, Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Hovnanian Enterprises, Inc. operates in the homebuilding industry, where substitutes are limited. However, there is a growing trend towards renting, which could be a substitute for buying a home.

Bargaining Power Of Customers

Hovnanian Enterprises, Inc. has a diverse customer base, which reduces the bargaining power of individual customers. Additionally, the company's focus on customer service and quality helps to build customer loyalty.

Bargaining Power Of Suppliers

Hovnanian Enterprises, Inc. relies on suppliers for materials and labor, but the company's scale and negotiating power help to mitigate the bargaining power of suppliers.

Threat Of New Entrants

The homebuilding industry has high barriers to entry, including regulatory hurdles and significant capital requirements, which limits the threat of new entrants.

Intensity Of Rivalry

The homebuilding industry is highly competitive, with many established players competing for market share. Hovnanian Enterprises, Inc. must differentiate itself through quality, customer service, and pricing to maintain its market position.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 66.44%
Debt Cost 5.88%
Equity Weight 33.56%
Equity Cost 17.05%
WACC 9.63%
Leverage 197.95%

11. Quality Control: Hovnanian Enterprises, Inc. passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Karat Packaging

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Growth: 7.9

Quality: 7.4

Yield: 9.0

Momentum: 3.0

Volatility: 6.0

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Legacy Housing

A-Score: 5.3/10

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Hovnanian

A-Score: 3.8/10

Value: 8.6

Growth: 4.6

Quality: 5.6

Yield: 0.0

Momentum: 2.0

Volatility: 2.0

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Value: 7.8

Growth: 3.9

Quality: 3.8

Yield: 0.0

Momentum: 2.5

Volatility: 4.0

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LGI Homes

A-Score: 3.4/10

Value: 8.1

Growth: 3.7

Quality: 4.6

Yield: 0.0

Momentum: 0.5

Volatility: 3.7

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United Homes

A-Score: 2.5/10

Value: 6.8

Growth: 2.7

Quality: 3.5

Yield: 0.0

Momentum: 1.5

Volatility: 0.7

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

103.66$

Current Price

103.66$

Potential

-0.00%

Expected Cash-Flows