Hovnanian Enterprises' (NYSE:HOV) investors will be pleased with their notable 64% return over the last three years
By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. For example, Hovnanian Enterprises, Inc. (NYSE:HOV) shareholders have seen the share price rise 64% over three years, well in excess of the market return (20%, not including dividends).
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for Hovnanian Enterprises
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During three years of share price growth, Hovnanian Enterprises achieved compound earnings per share growth of 215% per year. The average annual share price increase of 18% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time. This cautious sentiment is reflected in its (fairly low) P/E ratio of 1.37.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into Hovnanian Enterprises' key metrics by checking this interactive graph of Hovnanian Enterprises's earnings, revenue and cash flow.
A Different Perspective
We regret to report that Hovnanian Enterprises shareholders are down 50% for the year. Unfortunately, that's worse than the broader market decline of 22%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 3 warning signs for Hovnanian Enterprises (1 shouldn't be ignored!) that you should be aware of before investing here.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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