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GuruFocus has detected 2 Warning Signs with Hovnanian Enterprises Inc \$HOV.
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Hovnanian Enterprises Inc (NYSE:HOV)
Gross Profit
\$363 Mil (TTM As of Jan. 2017)

Hovnanian Enterprises Inc's gross profit for the three months ended in Jan. 2017 was \$79 Mil. Hovnanian Enterprises Inc's gross profit for the trailing twelve months (TTM) ended in Jan. 2017 was \$363 Mil.

Gross Margin is calculated as gross profit divided by its revenue. Hovnanian Enterprises Inc's gross profit for the three months ended in Jan. 2017 was \$79 Mil. Hovnanian Enterprises Inc's revenue for the three months ended in Jan. 2017 was \$552 Mil. Therefore, Hovnanian Enterprises Inc's Gross Margin for the quarter that ended in Jan. 2017 was 14.24%.

Hovnanian Enterprises Inc had a gross margin of 14.24% for the quarter that ended in Jan. 2017 => No sustainable competitive advantage

During the past 13 years, the highest Gross Margin of Hovnanian Enterprises Inc was 17.47%. The lowest was -37.36%. And the median was 8.43%.

Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

Hovnanian Enterprises Inc's Gross Profit for the fiscal year that ended in Oct. 2016 is calculated as

 Gross Profit (A: Oct. 2016 ) = Revenue - Cost of Goods Sold = 2752.247 - 2393.345 = 359

Hovnanian Enterprises Inc's Gross Profit for the quarter that ended in Jan. 2017 is calculated as

 Gross Profit (Q: Jan. 2017 ) = Revenue - Cost of Goods Sold = 552.009 - 473.388 = 79

Hovnanian Enterprises Inc Gross Profit for the trailing twelve months (TTM) ended in Jan. 2017 was 77.942 (Apr. 2016 ) + 94.18 (Jul. 2016 ) + 112.06 (Oct. 2016 ) + 78.621 (Jan. 2017 ) = \$363 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

Hovnanian Enterprises Inc's Gross Margin for the quarter that ended in Jan. 2017 is calculated as

 Gross Margin (Q: Jan. 2017 ) = Gross Profit (Q: Jan. 2017 ) / Revenue (Q: Jan. 2017 ) = (Revenue - Cost of Goods Sold) / Revenue = 79 / 552.009 = 14.24 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.

Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

Hovnanian Enterprises Inc had a gross margin of 14.24% for the quarter that ended in Jan. 2017 => No sustainable competitive advantage

Related Terms

Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Hovnanian Enterprises Inc Annual Data

 Oct07 Oct08 Oct09 Oct10 Oct11 Oct12 Oct13 Oct14 Oct15 Oct16 Gross_Profit 183 -559 -596 25 23 238 323 360 323 359

Hovnanian Enterprises Inc Quarterly Data

 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16 Apr16 Jul16 Oct16 Jan17 Gross_Profit 119 70 63 82 107 75 78 94 112 79
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