Analyzing Leggett & Platt (NYSE:LEG) & Hovnanian Enterprises (NYSE:HOV)

Leggett & Platt (NYSE:LEG) and Hovnanian Enterprises (NYSE:HOV) are both small-cap consumer discretionary companies, but which is the superior investment? We will compare the two companies based on the strength of their profitability, earnings, valuation, analyst recommendations, risk, institutional ownership and dividends.

Analyst Ratings

This is a summary of recent ratings and price targets for Leggett & Platt and Hovnanian Enterprises, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Leggett & Platt	0	4	0	1	2.40
Hovnanian Enterprises	2	2	0	0	1.50

Leggett & Platt currently has a consensus target price of $10.67, indicating a potential upside of 15.94%. Hovnanian Enterprises has a consensus target price of $74.00, indicating a potential downside of 39.79%. Given Leggett & Platt’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Leggett & Platt is more favorable than Hovnanian Enterprises.

Volatility & Risk

Leggett & Platt has a beta of 0.73, meaning that its share price is 27% less volatile than the S&P 500. Comparatively, Hovnanian Enterprises has a beta of 1.83, meaning that its share price is 83% more volatile than the S&P 500.

Profitability

This table compares Leggett & Platt and Hovnanian Enterprises’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Leggett & Platt	5.64%	13.31%	3.86%
Hovnanian Enterprises	0.64%	8.64%	2.17%

Earnings and Valuation

This table compares Leggett & Platt and Hovnanian Enterprises”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Leggett & Platt	$3.89 billion	0.32	$235.40 million	$1.56	5.90
Hovnanian Enterprises	$2.98 billion	0.25	$63.87 million	$0.95	129.37

Leggett & Platt has higher revenue and earnings than Hovnanian Enterprises. Leggett & Platt is trading at a lower price-to-earnings ratio than Hovnanian Enterprises, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

64.2% of Leggett & Platt shares are owned by institutional investors. Comparatively, 65.4% of Hovnanian Enterprises shares are owned by institutional investors. 2.4% of Leggett & Platt shares are owned by company insiders. Comparatively, 22.7% of Hovnanian Enterprises shares are owned by company 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.

Summary

Leggett & Platt beats Hovnanian Enterprises on 10 of the 14 factors compared between the two stocks.

About Leggett & Platt

Leggett & Platt, Inc. engages in the manufacture and distribution of furniture and engineered components and products among homes, offices, automobiles, and commercial aircraft. It operates through the following segments: Bedding Products, Specialized Products, and Furniture, Flooring & Textile Products. The Bedding Products segment supplies products and components for the home, including mattress springs and specialty foam, as well as adjustable beds, bedding machinery, steel rod, and drawn wire. The Specialized Products segment supplies titanium, nickel, and stainless-steel tubing for the aerospace industry, and serves the construction market with its hydraulic cylinders group. The Flooring, Furniture & Textile Products segment produces an extensive line of components and engineered systems for office, residential, and contract furniture manufacturers. The company was founded by J. P. Products and C. B. Platt in 1883 and is headquartered in Carthage, MO.

About Hovnanian Enterprises

Hovnanian Enterprises, Inc., through its subsidiaries, designs, constructs, markets, and sells residential homes in the United States. It offers single-family detached homes, attached townhomes and condominiums, urban infill, and active lifestyle homes with amenities, such as clubhouses, swimming pools, tennis courts, tot lots, and open areas. 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. It also provides mortgage loans, title insurance, and homeowner’s insurance services. The company was founded in 1959 and is headquartered in Matawan, New Jersey.