A blueprint for bankruptcy? New Jersey-based residential home builder Hovnanian Enterprises, Inc. pays its bills on time - yet we're seeing an exceptional amount of financial risk in this company.
In 2018, CreditRiskMonitor turned the spotlight on Hovnanian in a pair of blog posts, illuminating subscribers and prospects alike about creditors' spiked level exposure. Net sales plummeted for Hovnanian, its lowest level since fiscal 2014 on a trailing 12-month basis, and in all regions save for the Midwest U.S., revenue has declined significantly. Their FRISK® score has been at a "1" for more than a year's worth of time:
In this High Risk Report, we tear down the house that is Hovnanian. Credit and procurement managers reliant on trade payment data to determine financial risk will have their foundations rocked if and when Hovnanian meets Chapter 11. Given its weak performance – and limited cash flow – the company will likely be required to refinance its debt maturities since it won't be able to repay them. As such, the homebuilder is materially exposed to interest rate risk when rates inevitably rise and the proverbial can cannot be kicked further down the road.
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About High Risk Reports
Our High Risk Reports feature companies that are exhibiting a significantly high level of financial distress, as indicated by our proprietary FRISK® score.
The reports highlight the factors that have pushed a company's score lower on the "1" (worst) to "10" (best) FRISK® score, which is 96% accurate in predicting bankruptcy over a 12-month period. The High Risk Reports also includes analysis on financial indicators such as the company’s DBT index, stock performance, financial ratios and how it is performing relative to its industry peers.
The ultimate goal of the High Risk Report series is two-part: provide an early warning for those doing business with an increasingly distressed company and inform of the many signals that should be examined when assessing financial risks.