Hovnanian Enterprises (NYSE: HOV) and TRI Pointe Group (NYSE:TPH) are both small-cap construction companies, but which is the superior investment? We will compare the two companies based on the strength of their risk, institutional ownership, valuation, earnings, analyst recommendations, dividends and profitability.

Valuation and Earnings

This table compares Hovnanian Enterprises and TRI Pointe Group’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Hovnanian Enterprises $2.66 billion 0.10 $137.91 million $0.09 20.89
TRI Pointe Group $2.32 billion 0.83 $210.85 million $0.84 15.19

TRI Pointe Group has higher revenue, but lower earnings than Hovnanian Enterprises. TRI Pointe Group is trading at a lower price-to-earnings ratio than Hovnanian Enterprises, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Hovnanian Enterprises and TRI Pointe Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Hovnanian Enterprises 0.56% -8.20% 0.98%
TRI Pointe Group 5.77% 7.32% 3.71%

Volatility and Risk

Hovnanian Enterprises has a beta of 1.66, indicating that its share price is 66% more volatile than the S&P 500. Comparatively, TRI Pointe Group has a beta of 1.66, indicating that its share price is 66% more volatile than the S&P 500.

Insider & Institutional Ownership

31.0% of Hovnanian Enterprises shares are held by institutional investors. Comparatively, 98.7% of TRI Pointe Group shares are held by institutional investors. 15.4% of Hovnanian Enterprises shares are held by insiders. Comparatively, 9.4% of TRI Pointe Group shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Hovnanian Enterprises and TRI Pointe Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Hovnanian Enterprises 1 1 0 0 1.50
TRI Pointe Group 1 4 3 0 2.25

Hovnanian Enterprises presently has a consensus target price of $1.55, suggesting a potential downside of 17.55%. TRI Pointe Group has a consensus target price of $14.00, suggesting a potential upside of 9.72%. Given TRI Pointe Group’s stronger consensus rating and higher probable upside, analysts plainly believe TRI Pointe Group is more favorable than Hovnanian Enterprises.

Summary

TRI Pointe Group beats Hovnanian Enterprises on 11 of the 13 factors compared between the two stocks.

Hovnanian Enterprises Company Profile

Hovnanian Enterprises, Inc. is a builder of residential homes. The Company designs, constructs, markets and sells single-family detached homes, attached townhomes and condominiums, urban infill and active lifestyle homes in planned residential developments. The Company has two distinct operations: homebuilding and financial services. Its homebuilding operations consist of six segments: Northeast: New Jersey and Pennsylvania; Mid-Atlantic: Delaware, Maryland, Virginia, Washington, District of Columbia, and West Virginia; Midwest: Illinois and Ohio; Southeast: Florida, Georgia and South Carolina; Southwest: Arizona and Texas, and West: California. Its financial services operations provide mortgage loans and title services to the customers of its homebuilding operations. 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.

TRI Pointe Group Company Profile

TRI Pointe Group, Inc. is a homebuilder company. The Company’s operations are organized in two principal businesses, including homebuilding and financial services. Its homebuilding operation consists of six segments: Maracay Homes, including operations in Arizona; Pardee Homes, consisting of operations in California and Nevada; Quadrant Homes, consisting of operations in Washington; Trendmaker Homes, consisting of operations in Texas; TRI Pointe Homes, consisting of operations in California and Colorado, and Winchester Homes, consisting of operations in Maryland and Virginia. Its financial services operation (TRI Pointe Solutions) includes mortgage financing operations and title services operations. Its mortgage financing operation (TRI Pointe Connect) provides mortgage financing to its homebuyers in all of its operated markets. Its title services operation (TRI Pointe Assurance) provides title examinations for its homebuyers in its Trendmaker Homes and Winchester Homes brands.

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