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Hovnanian Enterprises Inc (NYSE:HOV)
Beneish M-Score
-3.01 (As of Today)

The zones of discrimination for M-Score is as such:

An M-Score of less than -2.22 suggests that the company is not an accounting manipulator.
An M-Score of greater than -2.22 signals that the company is likely an accounting manipulator.

Hovnanian Enterprises Inc has a M-score of -3.01 suggests that the company is not a manipulator.

HOV' s 10-Year Beneish M-Score Range
Min: -81.77   Max: 2.26
Current: -3.01

-81.77
2.26

During the past 13 years, the highest Beneish M-Score of Hovnanian Enterprises Inc was 2.26. The lowest was -81.77. And the median was -2.22.


Definition

The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Z-Score) or business trend (F-Score), M-score can be used to detect the risk of earnings manipulation. This is the original research paper on M-score.

The M-Score Variables:

The M-score of Hovnanian Enterprises Inc for today is based on a combination of the following eight different indices:

M=-4.84+0.92 * DSRI+0.528 * GMI+0.404 * AQI+0.892 * SGI+0.115 * DEPI
=-4.84+0.92 * 0+0.528 * 0.8148+0.404 * 0.8257+0.892 * 1.1799+0.115 * 1.3581
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0135+4.679 * 0.075-0.327 * 0.9757
=-3.01

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

This Year (Jan14) TTM:Last Year (Jan13) TTM:
Accounts Receivable was $0 Mil.
Revenue was 364.048 + 591.687 + 478.357 + 422.998 = $1,857 Mil.
Gross Profit was 65.007 + 94.541 + 93.513 + 31.451 = $285 Mil.
Total Current Assets was $1,523 Mil.
Total Assets was $1,787 Mil.
Property, Plant and Equipment(Net PPE) was $46 Mil.
Depreciation, Depletion and Amortization(DDA) was $4 Mil.
Selling, General & Admin. Expense(SGA) was $191 Mil.
Total Current Liabilities was $450 Mil.
Long-Term Debt was $1,794 Mil.
Net Income was -24.523 + 32.819 + 8.466 + 1.318 = $18 Mil.
Non Operating Income was 2.571 + 4.474 + 3.69 + 0.827 = $12 Mil.
Cash Flow from Operations was -131.052 + 56.665 + -31.477 + -21.695 = $-128 Mil.
Accounts Receivable was $3 Mil.
Revenue was 358.211 + 487.044 + 387.011 + 341.698 = $1,574 Mil.
Gross Profit was 58.511 + 58.016 + 66.846 + 13.114 = $196 Mil.
Total Current Assets was $1,298 Mil.
Total Assets was $1,580 Mil.
Property, Plant and Equipment(Net PPE) was $48 Mil.
Depreciation, Depletion and Amortization(DDA) was $6 Mil.
Selling, General & Admin. Expense(SGA) was $159 Mil.
Total Current Liabilities was $504 Mil.
Long-Term Debt was $1,529 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(0 / 1857.09) / (2.621 / 1573.964)
=0 / 0.00166522
=0

2. GMI = Gross Margin Index

Measured as the ratio of gross margin in year t-1 to gross margin in year t.

Gross margin has deteriorated when this index is above 1. A firm with poorer prospects is more likely to manipulate earnings.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(94.541 / 1573.964) / (65.007 / 1857.09)
=0.12483576 / 0.15320313
=0.8148

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (1522.76 + 45.647) / 1787.261) / (1 - (1298.157 + 47.781) / 1580.31)
=0.12245218 / 0.14830761
=0.8257

4. SGI = Sales Growth Index

Ratio of sales in year t to sales in year t-1.

Sales growth is not itself a measure of manipulation. However, growth companies are likely to find themselves under pressure to manipulate in order to keep up appearances.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=1857.09 / 1573.964
=1.1799

5. DEPI = Depreciation Index

Measured as the ratio of the rate of depreciation in year t-1 to the corresponding rate in year t.

DEPI greater than 1 indicates that assets are being depreciated at a slower rate. This suggests that the firm might be revising useful asset life assumptions upwards, or adopting a new method that is income friendly.

DEPI=(Depreciation_t-1 / (Depreciaton_t-1 + PPE_t-1)) / (Depreciation_t / (Depreciaton_t + PPE_t))
=(6.027 / (6.027 + 47.781)) / (4.103 / (4.103 + 45.647))
=0.11200937 / 0.08247236
=1.3581

6. SGAI = Sales, General and Administrative expenses Index

The ratio of SGA expenses in year t relative to year t-1.

SGA expenses index > 1 means that the company is becoming less efficient in generate sales.

SGAI=(SGA_t / Sales_t) / (SGA_t-1 /Sales_t-1)
=(190.63 / 1857.09) / (159.42 / 1573.964)
=0.10264984 / 0.10128567
=1.0135

7. LVGI = Leverage Index

The ratio of total debt to total assets in year t relative to yeat t-1.

An LVGI > 1 indicates an increase$sgai= in leverage

LVGI=((LTD_t + CurrentLiabilities_t) / TotalAssets_t) / ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1)
=((1793.512 + 449.873) / 1787.261) / ((1528.729 + 504.395) / 1580.31)
=1.25520839 / 1.28653492
=0.9757

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(18.08 - 11.562 - -127.559) / 1787.261
=0.075

An M-Score of less than -2.22 suggests that the company will not be a manipulator. An M-Score of greater than -2.22 signals that the company is likely to be a manipulator.

Hovnanian Enterprises Inc has a M-score of -3.01 suggests that the company will not be a manipulator.


Related Terms

Altman Z-Score, Piotroski F-Score, Accounts Receivable, Revenue, Gross Profit, Total Current Assets, Total Assets, Property, Plant and Equipment, Depreciation, Depletion and Amortization, Selling, General & Admin. Expense, Total Current Liabilities, Long-Term Debt, Net Income, Non Operating Income, Cash Flow from Operations


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

Oct04Oct05Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13
DSRI 1.02921.85142.27981.09940.98020.44771.59861.03550.90320
GMI 1.00320.96081.15485.9933-0.2260.4522-20.85140.87610.14140.8291
AQI 0.73440.90471.19150.69150.51722.2861.11041.1291.43090.8253
SGI 1.29731.28761.14950.78050.68930.48250.85940.82731.30881.2463
DEPI 0.83421.22230.93810.61931.6861.86311.20071.11881.31251.2284
SGAI 0.95081.04491.17881.0161.16351.31890.89721.0540.67260.9282
LVGI 0.92540.97971.07121.11821.32451.31971.03031.08031.01390.9673
TATA 0.1740.10080.2046-0.1455-0.4262-0.5076-0.0308-0.04820.01450.0061
M-score -1.47-1.00-0.11-0.84-5.67-5.65-13.66-2.86-2.42-3.26

Hovnanian Enterprises Inc Quarterly Data

Oct11Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14
DSRI 1.03551.18051.068500.90320.03590.0206100
GMI -0.9326-2.0166-1.3611-0.3283-0.1637-0.05160.22990.42150.78160.8148
AQI 1.1292.20092.18812.4791.43091.14331.01080.86460.82530.8257
SGI 0.82730.88290.99781.16891.30881.36641.33651.30351.24631.1799
DEPI 1.11881.11091.14181.32251.31251.27671.21981.20011.22841.3581
SGAI 0.87420.80820.88370.81170.69380.67330.67590.72280.89161.0135
LVGI 1.08031.06241.0690.96711.01390.99561.0141.04230.96730.9757
TATA -0.0482-0.0076-0.0475-0.03590.01450.00310.03530.02620.00610.075
M-score -3.79-3.54-3.39-3.44-2.58-3.43-3.24-2.39-3.28-3.01
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