On October 29th Zack's had a positive consensus to BUY HOV at 6.91. Hmmm, now some UBS analyst says HOV is a down grade from a buy based on...... his feeling- "the Company is now fairly valued." Guess he wants his buddies in on the cheap. Hello SEC!!!!!
Could it be that the company just isn't worth $7? Consider that usually when a homebuilder owes more than its land and other assets are worth, they are bankrupt. We however live in the land of Ben Bernanke, where junk bond interest rates are so low that a builder with negative net worth can keep operating and squeak by enough to make payments on the debt. In most historical financing environments, Hovnanian would be bankrupt. I could be missing something, but from what i can tell, there is very little future for the company. It could build and build for years in hopes of maybe paying down some of the debt. But thats about it. It is a zombie company. It could have 10 years of profits and at the end of it they would still owe what they own. So whats the point?
One thing you tried not to mention in your post is the assets the company held, such as land banking , may actually go up as real estate continues to recover, and the revenue and profit will continue to grow as price of new homes continues to recover as more and more people are purchasing new homes. We actually have a shortage of housing after five years of reduction in building new homes, while at the same time the growth of population did not slowdown