Hovnanian Enterprises Inc. performance impressive since earnings; HOV, MHO,
XIN
Tuesday, 30 March 2010
Earnings releases can make investing tricky. Many investors try to time
trades based on earnings filings, but usually find such trading is
inconsistent and dangerous. It is often better to take a look at how the
market has reacted to a company’s results a few weeks after the initial
announcement.
Hovnanian Enterprises Inc. (HOV) [HOV chart analysis] released its earnings
filing on 03/02. The company reported a change in quarter-over-quarter sales
of -14.48% and posted an EPS (trailing twelve months) of -3.91.
By now the market has had time to settle in and look closely at the numbers.
A stock’s performance in the few weeks following an announcement, compared
to other stocks in its industry, the industry as a whole, and market as a
whole, really tells you how investors and analysts felt about the
announcement.
Compared to peers
One way to gauge performance is look at a stock compared to other stocks in
its industry with similar market caps. HOV peer M/I Homes, Inc. (MHO) [MHO
chart analysis] has seen a 16.19% stock price gain over about the last
month, while another peer, Xinyuan Real Estate Company Ltd. (XIN) [XIN chart
analysis] saw a 3.08% gain. So with a return of 21.08%, Hovnanian
Enterprises Inc. outgained MHO and beat XIN’s price performance over the
last month.
NVR Inc.
Compared to the S&P 500 Index
Now, let’s see how Hovnanian Enterprises Inc. stock performance compares to
the rest of the market by looking at it compared to the Standard & Poor’s
500 Index (.INX). Since 03/02, the S&P 500 index has returned around 4.9%,
and again, HOV saw about a 21.08% gain during that time. Not bad.
Compared to the rest of the "Residential Construction" industry
Since the HOV announcement (about 30 days ago), the stock has posted a
21.08% gain. Over that same period, the stock’s industry, Residential
Construction, saw a 5.93% gain. That means HOV that has outperformed its
industry as a whole 255.48% since the earnings announcement. Small
differences aren’t significant, but when the spread is large it indicates
the stock is either much more or much less favored than its group as a
whole.
So by putting the returns in context by these comparisons, we can see how a
stock’s performance since earnings really measures up and make our investing
decisions on PRXL accordingly.
learningmarkets.com