Taking Tally Of Hovnanian Enterprises, Inc. (HOV), Applied Optoelectronics, Inc. (AAOI)

The shares of Hovnanian Enterprises, Inc. have decreased by more than -36.12% this year alone. The shares recently went up by 5.94% or $0.12 and now trades at $2.14. The shares of Applied Optoelectronics, Inc. (NASDAQ:AAOI), has slumped by -17.29% year to date as of 02/14/2018. The shares currently trade at $31.28 and have been able to report a change of -0.79% over the past one week.

The stock of Hovnanian Enterprises, Inc. and Applied Optoelectronics, Inc. were two of the most active stocks on Wednesday. Investors seem to be very interested in what happens to the stocks of these two companies but do investors favor one over the other? We will analyze the growth, profitability, risk, valuation, and insider trends of both companies and see which one investors prefer.

Profitability and Returns

Growth alone cannot be used to see if the company will be valuable. Shareholders will be the losers if a company invest in ventures that aren’t profitable enough to support upbeat growth. In order for us to accurately measure profitability and return, we will be using the EBITDA margin and Return on Investment (ROI), which balances the difference in capital structure. The ROI of HOV is -16.80% while that of AAOI is 12.30%. These figures suggest that AAOI ventures generate a higher ROI than that of HOV.

Cash Flow 

The value of a stock is ultimately determined by the amount of cash flow that the investors have available. Over the last 12 months, HOV’s free cash flow per share is a positive 5.6.


HOV currently trades at a P/S of 0.13 while AAOI trades at a forward P/E of 9.10, a P/B of 1.86, and a P/S of 1.63. This means that looking at the earnings, book values and sales basis, HOV is the cheaper one. It is very obvious that earnings are the most important factors to investors, thus analysts are most likely to place their bet on the P/E.

Analyst Price Targets and Opinions

The mistake some people make is that they think a cheap stock has more value to it. In order to know the value of a stock, there is need to compare its current price to its likely trading price in the future. The price of HOV is currently at a 40.79% to its one-year price target of 1.52. Looking at its rival pricing, AAOI is at a -32.95% relative to its price target of 46.65. This figure implies that over the next one year, AAOI is a better investment.

When looking at the investment recommendation on say a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell), HOV is given a 4.30 while 2.50 placed for AAOI. This means that analysts are more bullish on the outlook for HOV stocks.

Insider Activity and Investor Sentiment

Short interest or otherwise called the percentage of a stock’s tradable shares currently being shorted is another data that investors use to get a handle on sentiment. The short ratio for HOV is 2.81 while that of AAOI is just 10.17. This means that analysts are more bullish on the forecast for HOV stock.


The stock of Applied Optoelectronics, Inc. defeats that of Hovnanian Enterprises, Inc. when the two are compared, with AAOI taking 6 out of the total factors that were been considered. AAOI happens to be more profitable, generates a higher ROI, has higher cash flow per share, higher liquidity and has a lower financial risk. When looking at the stock valuation, AAOI is the cheaper one on an earnings, book value and sales basis. Finally, the sentiment signal for AAOI is better on when it is viewed on short interest.

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