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Hovnanian Enterprises Inc (NYSE:HOV)
Beneish M-Score
-2.03 (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 -2.03 signals that the company is a manipulator.

HOV' s Beneish M-Score Range Over the Past 10 Years
Min: -81.56   Max: 2.23
Current: -2.03

-81.56
2.23

During the past 13 years, the highest Beneish M-Score of Hovnanian Enterprises Inc was 2.23. The lowest was -81.56. And the median was -2.15.


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 * 1+0.528 * 1.181+0.404 * 1.0214+0.892 * 1.1387+0.115 * 0.9937
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8262+4.679 * 0.0379-0.327 * 0.9671
=-2.03

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

This Year (Apr16) TTM:Last Year (Apr15) TTM:
Accounts Receivable was $0 Mil.
Revenue was 654.723 + 575.605 + 693.204 + 540.613 = $2,464 Mil.
Gross Profit was 77.942 + 74.72 + 107.454 + 82.344 = $342 Mil.
Total Current Assets was $1,812 Mil.
Total Assets was $2,519 Mil.
Property, Plant and Equipment(Net PPE) was $46 Mil.
Depreciation, Depletion and Amortization(DDA) was $3 Mil.
Selling, General & Admin. Expense(SGA) was $250 Mil.
Total Current Liabilities was $686 Mil.
Long-Term Debt was $1,765 Mil.
Net Income was -8.461 + -16.173 + 25.519 + -7.684 = $-7 Mil.
Non Operating Income was -2.493 + -2.864 + 0.56 + -1.98 = $-7 Mil.
Cash Flow from Operations was 33.894 + -65.081 + 12.145 + -76.551 = $-96 Mil.
Accounts Receivable was $0 Mil.
Revenue was 468.949 + 445.714 + 698.394 + 551.009 = $2,164 Mil.
Gross Profit was 62.978 + 70.037 + 119.096 + 103.084 = $355 Mil.
Total Current Assets was $1,824 Mil.
Total Assets was $2,517 Mil.
Property, Plant and Equipment(Net PPE) was $46 Mil.
Depreciation, Depletion and Amortization(DDA) was $3 Mil.
Selling, General & Admin. Expense(SGA) was $266 Mil.
Total Current Liabilities was $624 Mil.
Long-Term Debt was $1,908 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 / 2464.145) / (0 / 2164.066)
=0 / 0
=1

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)
=(355.195 / 2164.066) / (342.46 / 2464.145)
=0.16413316 / 0.13897721
=1.181

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 - (1812.049 + 45.67) / 2518.627) / (1 - (1823.932 + 46.414) / 2516.994)
=0.26240805 / 0.25691281
=1.0214

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
=2464.145 / 2164.066
=1.1387

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))
=(3.43 / (3.43 + 46.414)) / (3.398 / (3.398 + 45.67))
=0.0688147 / 0.06925084
=0.9937

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)
=(250.042 / 2464.145) / (265.772 / 2164.066)
=0.10147211 / 0.12281141
=0.8262

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)
=((1764.973 + 685.628) / 2518.627) / ((1908.38 + 623.97) / 2516.994)
=0.97299084 / 1.00610093
=0.9671

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
=(-6.799 - -6.777 - -95.593) / 2518.627
=0.0379

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 -2.03 signals that the company is likely to 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

Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Oct15
DSRI 0.65741.48541.04011.16871.59861.03550111
GMI 1.15485.9933-0.2260.4522-20.85140.87610.12740.92040.99891.1624
AQI 1.19150.69150.51722.2861.11041.07291.50570.82531.7740.9202
SGI 1.14950.78050.68930.48250.85940.82731.30881.24631.11461.0412
DEPI 0.93810.61931.6861.86311.20071.11881.31251.22841.35840.9836
SGAI 1.17881.0161.16351.31890.8621.07260.68790.92821.03880.9453
LVGI 1.07121.11821.32451.31971.03031.09161.00340.95340.84470.9965
TATA 0.2046-0.1455-0.4262-0.5076-0.0254-0.04520.03110.00660.21640.1177
M-score -1.61-0.48-5.61-4.99-13.63-2.88-3.15-2.29-0.97-1.83

Hovnanian Enterprises Inc Quarterly Data

Jan14Apr14Jul14Oct14Jan15Apr15Jul15Oct15Jan16Apr16
DSRI 1011111111
GMI 0.82290.96381.01060.97680.97991.0551.10521.16241.20671.181
AQI 0.81650.81680.92871.7742.10582.11511.91060.92021.06461.0214
SGI 1.17991.13821.12031.11461.15511.14861.10071.04121.06221.1387
DEPI 1.35811.53071.43281.35841.21741.05011.02540.98360.98340.9937
SGAI 1.22941.07621.09551.03880.97010.95550.95870.94530.9090.8262
LVGI 0.97570.97860.99540.84470.82860.80510.85980.99650.9130.9671
TATA 0.06740.08130.10360.21640.23230.22440.21350.11770.06920.0379
M-score -2.16-2.93-1.88-0.98-0.73-0.74-0.91-1.83-1.92-2.03
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