M/I Homes (NYSE: MHO) and Hovnanian Enterprises (NYSE:HOV) are both small-cap construction companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitabiliy, analyst recommendations, earnings, institutional ownership, dividends, valuation and risk.

Institutional and Insider Ownership

30.0% of Hovnanian Enterprises shares are owned by institutional investors. 4.7% of M/I Homes shares are owned by insiders. Comparatively, 15.4% of Hovnanian Enterprises shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Volatility and Risk

M/I Homes has a beta of 1.11, suggesting that its share price is 11% more volatile than the S&P 500. Comparatively, Hovnanian Enterprises has a beta of 1.73, suggesting that its share price is 73% more volatile than the S&P 500.

Profitability

This table compares M/I Homes and Hovnanian Enterprises’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
M/I Homes 3.62% 12.59% 4.95%
Hovnanian Enterprises 0.56% -8.20% 0.98%

Analyst Ratings

This is a summary of recent ratings and price targets for M/I Homes and Hovnanian Enterprises, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
M/I Homes 0 1 1 0 2.50
Hovnanian Enterprises 1 1 0 0 1.50

M/I Homes presently has a consensus target price of $32.00, suggesting a potential upside of 17.43%. Hovnanian Enterprises has a consensus target price of $1.55, suggesting a potential downside of 35.68%. Given M/I Homes’ stronger consensus rating and higher possible upside, equities research analysts plainly believe M/I Homes is more favorable than Hovnanian Enterprises.

Valuation and Earnings

This table compares M/I Homes and Hovnanian Enterprises’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
M/I Homes $1.77 billion 0.38 $132.88 million $2.09 13.04
Hovnanian Enterprises $2.66 billion 0.12 $137.91 million $0.09 26.78

Hovnanian Enterprises has higher revenue and earnings than M/I Homes. M/I Homes 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

M/I Homes beats Hovnanian Enterprises on 8 of the 14 factors compared between the two stocks.

M/I Homes Company Profile

M/I Homes, Inc. is a builder of single-family homes. The Company consists of two operations: homebuilding and financial services. It operates through Midwest homebuilding, Southern homebuilding, Mid-Atlantic homebuilding and financial services operations segments. The Company and its subsidiaries are engaged primarily in the construction and sale of single-family residential homes in 15 markets: Columbus and Cincinnati, Ohio; Indianapolis, Indiana; Chicago, Illinois; Minneapolis/St. Paul, Minnesota; Tampa, Orlando and Sarasota, Florida; Austin, Dallas/Fort Worth, Houston and San Antonio, Texas; Charlotte and Raleigh, North Carolina; and the Virginia and Maryland suburbs of Washington, D.C. The Company’s financial services operations support its homebuilding operations by providing mortgage loans and title services to the customers of its homebuilding operations. It markets and sells homes primarily under the M/I Homes brand (M/I Homes and Showcase Collection (by M/I)).

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.

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