Hovnanian Enterprises (NYSE: HOV) and Meritage Corporation (NYSE:MTH) are both small-cap construction companies, but which is the better business? We will contrast the two businesses based on the strength of their institutional ownership, profitability, earnings, analyst recommendations, valuation, risk and dividends.
Profitability
This table compares Hovnanian Enterprises and Meritage Corporation’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% |
| Meritage Corporation | 4.94% | 10.74% | 5.16% |
Risk and Volatility
Hovnanian Enterprises has a beta of 1.69, suggesting that its stock price is 69% more volatile than the S&P 500. Comparatively, Meritage Corporation has a beta of 1.47, suggesting that its stock price is 47% more volatile than the S&P 500.
Analyst Recommendations
This is a breakdown of recent ratings and target prices for Hovnanian Enterprises and Meritage Corporation, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Hovnanian Enterprises | 1 | 1 | 0 | 0 | 1.50 |
| Meritage Corporation | 2 | 6 | 1 | 0 | 1.89 |
Hovnanian Enterprises presently has a consensus price target of $1.55, suggesting a potential downside of 23.27%. Meritage Corporation has a consensus price target of $40.29, suggesting a potential downside of 4.31%. Given Meritage Corporation’s stronger consensus rating and higher probable upside, analysts clearly believe Meritage Corporation is more favorable than Hovnanian Enterprises.
Institutional & Insider Ownership
29.8% of Hovnanian Enterprises shares are held by institutional investors. Comparatively, 97.1% of Meritage Corporation shares are held by institutional investors. 15.4% of Hovnanian Enterprises shares are held by insiders. Comparatively, 5.6% of Meritage Corporation shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.
Valuation & Earnings
This table compares Hovnanian Enterprises and Meritage Corporation’s 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 | 22.44 |
| Meritage Corporation | $3.12 billion | 0.54 | $241.92 million | $3.64 | 11.57 |
Meritage Corporation has higher revenue and earnings than Hovnanian Enterprises. Meritage Corporation is trading at a lower price-to-earnings ratio than Hovnanian Enterprises, indicating that it is currently the more affordable of the two stocks.
Summary
Meritage Corporation beats Hovnanian Enterprises on 11 of the 14 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.
Meritage Corporation Company Profile
Meritage Homes Corporation operates as a holding company. The Company is a designer and builder of single-family homes. The Company operates through two segments: homebuilding and financial services. The homebuilding segment is engaged in the business of acquiring and developing land, constructing homes, marketing and selling those homes, and providing warranty and customer services. It builds homes in the regions of the United States and offers a range of homes that are designed for a range of homebuyers, including first-time, move-up, active adult and luxury. As of December 31, 2016, it had homebuilding operations in three regions: West, Central and East, which were consisted of nine states: Arizona, California, Colorado, Texas, Florida, Georgia, North Carolina, South Carolina and Tennessee. It also operates Carefree Title Agency, Inc. (Carefree Title) company. Carefree Title’s core business includes title insurance and closing/settlement services it offers to its homebuyers.
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