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Hovnanian Enterprises Inc (NYSE:HOV)
Piotroski F-Score
3 (As of Today)

Warning Sign:

Piotroski F-Score of 3 is low, which usually implies poor business operation.

The zones of discrimination were as such:

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Hovnanian Enterprises Inc has an F-score of 3. It is a bad or low score, which usually implies poor business operation.

HOV' s Piotroski F-Score Range Over the Past 10 Years
Min: 1   Max: 7
Current: 3

1
7

During the past 13 years, the highest Piotroski F-Score of Hovnanian Enterprises Inc was 7. The lowest was 1. And the median was 4.


Definition

How is the Piotroski F-Score calculated?

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Oct15) TTM:Last Year (Oct14) TTM:
Net Income was -14.376 + -19.559 + -7.684 + 25.519 = $-16 Mil.
Cash Flow from Operations was -195.617 + -60.512 + -76.551 + 12.145 = $-321 Mil.
Revenue was 445.714 + 468.949 + 540.613 + 693.204 = $2,148 Mil.
Gross Profit was 70.037 + 62.978 + 82.344 + 107.454 = $323 Mil.
Average Total Assets from the begining of this year (Oct14)
to the end of this year (Oct15) was
(2289.93 + 2461.435 + 2516.994 + 2549.344 + 2602.298) / 5 = $2484.0002 Mil.
Total Assets at the begining of this year (Oct14) was $2,290 Mil.
Long-Term Debt was $1,895 Mil.
Total Current Assets was $1,897 Mil.
Total Current Liabilities was $795 Mil.
Net Income was -24.523 + -7.902 + 17.105 + 322.464 = $307 Mil.

Revenue was 364.048 + 449.929 + 551.009 + 698.394 = $2,063 Mil.
Gross Profit was 65.007 + 79.86 + 110.296 + 127.121 = $382 Mil.
Average Total Assets from the begining of last year (Oct13)
to the end of last year (Oct14) was
(1759.13 + 1787.261 + 1838.823 + 1893.728 + 2289.93) / 5 = $1913.7744 Mil.
Total Assets at the begining of last year (Oct13) was $1,759 Mil.
Long-Term Debt was $1,658 Mil.
Total Current Assets was $1,636 Mil.
Total Current Liabilities was $718 Mil.

Profitability

Question 1. Return on Assets (ROA)

Net income before extraordinary items for the year divided by total assets at the beginning of the year.

Score 1 if positive, 0 if negative.

Hovnanian Enterprises Inc's current net income (TTM) was -16. ==> Negative ==> Score 0.

Question 2. Cash Flow Return on Assets (CFROA)

Net cash flow from operating activities (operating cash flow) divided by total assets at the beginning of the year.

Score 1 if positive, 0 if negative.

Hovnanian Enterprises Inc's current cash flow from operations (TTM) was -321. ==> Negative ==> Score 0.

Question 3. Change in Return on Assets

Compare this year’s return on assets (1) to last year’s return on assets.

Score 1 if it’s higher, 0 if it’s lower.

ROA (This Year)=Net Income (TTM)/Total Assets at the Beginning of This Year (Oct14)
=-16.1/2289.93
=-0.00703078

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Oct13)
=307.144/1759.13
=0.17459994

Hovnanian Enterprises Inc's return on assets of this year was -0.00703078. Hovnanian Enterprises Inc's return on assets of last year was 0.17459994. ==> Last year is higher ==> Score 0.

Question 4. Quality of Earnings (Accrual)

Compare Cash flow return on assets (2) to return on assets (1)

Score 1 if CFROA > ROA, 0 if CFROA <= ROA.

Hovnanian Enterprises Inc's current net income (TTM) was -16. Hovnanian Enterprises Inc's current cash flow from operations (TTM) was -321. ==> -321 <= -16 ==> CFROA <= ROA ==> Score 0.

Funding

Question 5. Change in Gearing or Leverage

Compare this year’s gearing (long-term debt divided by average total assets) to last year’s gearing.

Score 0 if this year's gearing is higher, 1 otherwise.

Gearing (This Year: Oct15)=Long-Term Debt/Average Total Assets from Oct14 to Oct15
=1895.247/2484.0002
=0.76298182

Gearing (Last Year: Oct14)=Long-Term Debt/Average Total Assets from Oct13 to Oct14
=1657.557/1913.7744
=0.86611933

Hovnanian Enterprises Inc's gearing of this year was 0.76298182. Hovnanian Enterprises Inc's gearing of last year was 0.86611933. ==> This year is lower or equal to last year. ==> Score 1.

Question 6. Change in Working Capital (Liquidity)

Compare this year’s current ratio (current assets divided by current liabilities) to last year’s current ratio.

Score 1 if this year'’s current ratio is higher, 0 if it’s lower

Current Ratio (This Year: Oct15)=Total Current Assets/Total Current Liabilities
=1897.275/794.747
=2.38726916

Current Ratio (Last Year: Oct14)=Total Current Assets/Total Current Liabilities
=1635.53/717.95
=2.27805557

Hovnanian Enterprises Inc's current ratio of this year was 2.38726916. Hovnanian Enterprises Inc's current ratio of last year was 2.27805557. ==> This year's current ratio is higher. ==> Score 1.

Question 7. Change in Shares in Issue

Compare the number of shares in issue this year, to the number in issue last year.

Score 0 if there is larger number of shares in issue this year, 1 otherwise.

Hovnanian Enterprises Inc's number of shares in issue this year was 146.9. Hovnanian Enterprises Inc's number of shares in issue last year was 162.4. ==> There is smaller number of shares in issue this year, or the same. ==> Score 1.

Efficiency

Question 8. Change in Gross Margin

Compare this year’s gross margin (gross profit divided by sales) to last year’s.

Score 1 if this year’s gross margin is higher, 0 if it’s lower.

Gross Margin (This Year: TTM)=Gross Profit/Revenue
=322.813/2148.48
=0.15025181

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=382.284/2063.38
=0.18527077

Hovnanian Enterprises Inc's gross margin of this year was 0.15025181. Hovnanian Enterprises Inc's gross margin of last year was 0.18527077. ==> Last year's gross margin is higher ==> Score 0.

Question 9. Change in asset turnover

Compare this year’s asset turnover (total sales for the year divided by total assets at the beginning of the year) to last year’s asset turnover ratio.

Score 1 if this year’s asset turnover ratio is higher, 0 if it’s lower

Asset Turnover (This Year)=Revenue (TTM)/Total Assets at the Beginning of This Year (Oct14)
=2148.48/2289.93
=0.93822955

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Oct13)
=2063.38/1759.13
=1.17295481

Hovnanian Enterprises Inc's asset turnover of this year was 0.93822955. Hovnanian Enterprises Inc's asset turnover of last year was 1.17295481. ==> Last year's asset turnover is higher ==> Score 0.

Evaluation

Piotroski F-Score= Que. 1+ Que. 2+ Que. 3+Que. 4+Que. 5+Que. 6+Que. 7+Que. 8+Que. 9
=0+0+0+0+1+1+1+0+0
=3

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Hovnanian Enterprises Inc has an F-score of 3. It is a bad or low score, which usually implies poor business operation.


Explanation

The developer of the system is Joseph D. Piotroski is relatively unknown accounting professor who shuns publicity and rarely gives interviews.

He graduated from the University of Illinois with a B.S. in accounting in 1989, received an M.B.A. from Indiana University in 1994. Five years later, in 1999, after earning a Ph.D. in accounting from the University of Michigan, he became an associate professor of accounting at the University of Chicago.

In 2000, he wrote a research paper called "Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers" (pdf).

He wanted to see if he can develop a system (using a simple nine-point scoring system) that can increase the returns of a strategy of investing in low price to book (referred to in the paper as high book to market) value companies.

What he found was something that exceeded his most optimistic expectations.

Buying only those companies that scored highest (8 or 9) on his nine-point scale, or F-Score as he called it, over the 20 year period from 1976 to 1996 led to an average out-performance over the market of 13.4%.

Even more impressive were the results of a strategy of investing in the highest F-Score companies (8 or 9) and shorting companies with the lowest F-Score (0 or 1).

Over the same period from 1976 to 1996 (20 years) this strategy led to an average yearly return of 23%, substantially outperforming the average S&P 500 index return of 15.83% over the same period.


Related Terms

Net Income, Cash Flow from Operations, Revenue, Gross Profit, Total Assets, Long-Term Debt, Total Current Assets, Total Current Liabilities


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Hovnanian Enterprises Inc Annual Data

Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Oct15
Question 1 1000100110
Question 2 0110100100
Question 3 0001101110
Question 4 0111110000
Question 5 1000000111
Question 6 1110000101
Question 7 1100000001
Question 8 0000111110
Question 9 0000101110
F-score 4432623753

Hovnanian Enterprises Inc Quarterly Data

Jul13Oct13Jan14Apr14Jul14Oct14Jan15Apr15Jul15Oct15
Question 1 0111111110
Question 2 0100000000
Question 3 0111111110
Question 4 1000000000
Question 5 0100111111
Question 6 1111000101
Question 7 0001100011
Question 8 1111111000
Question 9 1111111100
F-score 4756655543
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