Critical Review: Aterian (NASDAQ:ATER) and Hovnanian Enterprises (NYSE:HOV)

Hovnanian Enterprises (NYSE:HOV) and Aterian (NASDAQ:ATER) are both small-cap consumer discretionary companies, but which is the better stock? We will contrast the two businesses based on the strength of their dividends, institutional ownership, valuation, earnings, analyst recommendations, profitability and risk.

Institutional & Insider Ownership

65.4% of Hovnanian Enterprises shares are held by institutional investors. Comparatively, 7.0% of Aterian shares are held by institutional investors. 22.7% of Hovnanian Enterprises shares are held by company insiders. Comparatively, 19.5% of Aterian shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Risk & Volatility

Hovnanian Enterprises has a beta of 1.97, meaning that its share price is 97% more volatile than the S&P 500. Comparatively, Aterian has a beta of 1.37, meaning that its share price is 37% more volatile than the S&P 500.

Earnings and Valuation

This table compares Hovnanian Enterprises and Aterian”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Hovnanian Enterprises	$2.82 billion	0.20	$63.87 million	$0.95	101.17
Aterian	$68.85 million	0.13	-$18.98 million	($1.99)	-0.45

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

Analyst Recommendations

This is a summary of recent ratings for Hovnanian Enterprises and Aterian, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Hovnanian Enterprises	2	1	0	0	1.33
Aterian	1	0	0	0	1.00

Hovnanian Enterprises currently has a consensus target price of $74.00, indicating a potential downside of 23.00%. Given Hovnanian Enterprises’ stronger consensus rating and higher possible upside, research analysts clearly believe Hovnanian Enterprises is more favorable than Aterian.

Profitability

This table compares Hovnanian Enterprises and Aterian’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Hovnanian Enterprises	0.64%	8.64%	2.17%
Aterian	-49.30%	-92.04%	-47.83%

Summary

Hovnanian Enterprises beats Aterian on 13 of the 13 factors compared between the two stocks.

About Hovnanian Enterprises

Hovnanian Enterprises, Inc. is a U.S. homebuilding company that develops and sells new homes and residential communities. Its offerings include single-family detached homes, townhomes and homes in active-adult communities, with designs and features tailored to different buyer needs and price ranges. The company operates under the K. Hovnanian Homes name and serves markets across several regions of the United States, including the Northeast, Mid-Atlantic, Southeast, Midwest and Southwest. Through affiliated businesses, it also provides services such as mortgage financing and title services to homebuyers.

About Aterian

Aterian, Inc. (NASDAQ: ATER) is a technology-enabled consumer products company that develops, acquires and sells products through online retail channels. Its portfolio has included household, kitchen, health and wellness, beauty, outdoor and other consumer-focused products marketed under a range of brands. The company uses data analytics, software and automation to identify product opportunities, manage sourcing and manufacturing, optimize marketing, and support sales and inventory decisions. Aterian distributes its products primarily through third-party e-commerce marketplaces, including Amazon and Walmart, as well as through company-operated websites and other online channels.