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Hovnanian Enterprises Inc  (NYSE:HOV) Financial Strength: 5 (As of Jul. 2017)

Hovnanian Enterprises Inc has the Financial Strength Rank of 5.

GuruFocus Financial Strength Rank measures how strong a company's financial situation is. It is based on these factors:

1. The debt burden that the company has as measured by its Interest Coverage (current year). The higher, the better.
2. Debt to revenue ratio. The lower, the better.
3. Altman Z-Score.

Hovnanian Enterprises Inc's Interest Coverage for the quarter that ended in Jul. 2017 was 0.83. Hovnanian Enterprises Inc's debt to revenue ratio for the quarter that ended in Jul. 2017 was 2.93. As of today, Hovnanian Enterprises Inc's Altman Z-Score is 1.26.


Historical Data

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

* Premium members only.

Hovnanian Enterprises Inc Annual Data

Oct07 Oct08 Oct09 Oct10 Oct11 Oct12 Oct13 Oct14 Oct15 Oct16
Financial Strength Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 0.00 0.00 0.00 0.00 0.00

Hovnanian Enterprises Inc Quarterly Data

Oct12 Jan13 Apr13 Jul13 Oct13 Jan14 Apr14 Jul14 Oct14 Jan15 Apr15 Jul15 Oct15 Jan16 Apr16 Jul16 Oct16 Jan17 Apr17 Jul17
Financial Strength Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 0.00 0.00 0.00 0.00 0.00

Competitive Comparison
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap.


Calculation

GuruFocus Financial Strength Rank measures how strong a company's financial situation is. It is based on these factors

A company ranks high with financial strength is likely to withstand any business slowdowns and recessions.

1. The debt burden that the company has as measured by its Interest Coverage (current year). The higher, the better.

Note: If both Interest Expense and Interest Income are empty, while Net Interest Income is negative, then use Net Interest Income as Interest Expense.

Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company's Operating Income (EBIT) by its Interest Expense:

Hovnanian Enterprises Inc's Interest Expense for the months ended in Jul. 2017 was $-24 Mil. Its Operating Income for the months ended in Jul. 2017 was $19 Mil. And its Long-Term Debt & Capital Lease Obligation for the quarter that ended in Jul. 2017 was $1,651 Mil.

Hovnanian Enterprises Inc's Interest Coverage for the quarter that ended in Jul. 2017 is

Interest Coverage=-1*Operating Income (Q: Jul. 2017 )/Interest Expense (Q: Jul. 2017 )
=-1*19.499/-23.559
=0.83

The higher the ratio, the stronger the company's financial strength is.

2. Debt to revenue ratio. The lower, the better.

Hovnanian Enterprises Inc's Debt to Revenue Ratio for the quarter that ended in Jul. 2017 is

Debt to Revenue Ratio=Total Debt (Q: Jul. 2017 ) / Revenue (Q: Jul. 2017 )
=(Current Portion of Long-Term Debt + Long-Term Debt & Capital Lease Obligation) / Revenue
=(84.165 + 1650.543) / 592.035
=2.93

3. Altman Z-Score.

Z-Score model is an accurate forecaster of failure up to two years prior to distress. It can be considered the assessment of the distress of industrial corporations.

The zones of discrimination were as such:

When Z-Score is less than 1.81, it is in Distress Zones.
When Z-Score is greater than 2.99, it is in Safe Zones.
When Z-Score is between 1.81 and 2.99, it is in Grey Zones.

Hovnanian Enterprises Inc has a Z-score of 1.26, indicating it is in Distress Zones. This implies bankrupcy possibility in the next two years.

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


Explanation

The maximum rank is 10. Companies with rank 7 or higher will be unlikely to fall into distressed situations. Companies with rank of 3 or less are likely in financial distress.

Hovnanian Enterprises Inc has the Financial Strength Rank of 5.


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