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Hovnanian Enterprises Inc (NYSE:HOV)
Beneish M-Score
-0.97 (As of Today)

Warning Sign:

Beneish M-Score -0.97 higher than -2.22, which implies that it might have manipulated its financial results.

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 -1.10 signals that the company is a manipulator.

HOV' s 10-Year Beneish M-Score Range
Min: -13.88   Max: -0.44
Current: -0.97

-13.88
-0.44

During the past 13 years, the highest Beneish M-Score of Hovnanian Enterprises Inc was -0.44. The lowest was -13.88. And the median was -2.12.


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 * 0.8106+0.404 * 1.7092+0.892 * 1.1146+0.115 * 1.3584
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.2674+4.679 * 0.2226-0.327 * 0.8325
=-1.10

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

This Year (Oct14) TTM:Last Year (Oct13) TTM:
Accounts Receivable was $0 Mil.
Revenue was 698.394 + 551.009 + 449.929 + 364.048 = $2,063 Mil.
Gross Profit was 127.121 + 110.296 + 79.86 + 65.007 = $382 Mil.
Total Current Assets was $1,636 Mil.
Total Assets was $2,290 Mil.
Property, Plant and Equipment(Net PPE) was $47 Mil.
Depreciation, Depletion and Amortization(DDA) was $3 Mil.
Selling, General & Admin. Expense(SGA) was $255 Mil.
Total Current Liabilities was $718 Mil.
Long-Term Debt was $1,658 Mil.
Net Income was 322.464 + 17.105 + -7.902 + -24.523 = $307 Mil.
Non Operating Income was -5.275 + -8.09 + -1.239 + 2.571 = $-12 Mil.
Cash Flow from Operations was 68.958 + -73.437 + -55.054 + -131.052 = $-191 Mil.
Accounts Receivable was $0 Mil.
Revenue was 591.687 + 478.357 + 422.998 + 358.211 = $1,851 Mil.
Gross Profit was 94.541 + 93.513 + 31.451 + 58.511 = $278 Mil.
Total Current Assets was $1,440 Mil.
Total Assets was $1,759 Mil.
Property, Plant and Equipment(Net PPE) was $46 Mil.
Depreciation, Depletion and Amortization(DDA) was $5 Mil.
Selling, General & Admin. Expense(SGA) was $180 Mil.
Total Current Liabilities was $582 Mil.
Long-Term Debt was $1,610 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 / 2063.38) / (0 / 1851.253)
=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)
=(110.296 / 1851.253) / (127.121 / 2063.38)
=0.1501772 / 0.18527077
=0.8106

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 - (1635.53 + 46.744) / 2289.93) / (1 - (1439.811 + 46.211) / 1759.13)
=0.26536008 / 0.15525174
=1.7092

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
=2063.38 / 1851.253
=1.1146

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))
=(4.712 / (4.712 + 46.211)) / (3.417 / (3.417 + 46.744))
=0.09253186 / 0.06812065
=1.3584

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)
=(254.912 / 2063.38) / (180.45 / 1851.253)
=0.12354099 / 0.09747452
=1.2674

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)
=((1657.557 + 717.95) / 2289.93) / ((1610.081 + 581.848) / 1759.13)
=1.03737101 / 1.24603014
=0.8325

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
=(307.144 - -12.033 - -190.585) / 2289.93
=0.2226

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 -1.10 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

Oct05Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14
DSRI 1.71590.65741.48541.04011.16871.59861.03550.903201
GMI 0.96081.15485.9933-0.2260.4755-19.82710.87610.14140.82910.9254
AQI 0.90471.19150.69150.51722.8870.87931.07291.2121.02531.7092
SGI 1.28761.14950.78050.68930.48250.85940.82731.30881.24631.1146
DEPI 1.22230.93810.61931.6861.86311.20071.11881.31251.22841.3584
SGAI 1.04491.17881.0161.16351.31890.8621.07260.68790.92821.0388
LVGI 0.97971.07121.11821.32451.28671.05671.09161.00020.97040.8325
TATA 0.10080.2046-0.1455-0.4262-0.5192-0.0254-0.04520.0170.00660.2289
M-score -1.13-1.61-0.48-5.61-4.78-13.19-2.88-2.49-3.18-0.97

Hovnanian Enterprises Inc Quarterly Data

Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14Jul14Oct14
DSRI 00.90320.03590.0206100011
GMI -0.13660.16430.28420.28230.44520.82880.85850.77050.8270.8106
AQI 2.4791.2121.14331.01080.86461.02530.82570.81680.92871.7092
SGI 1.16891.30881.36641.33651.30351.24631.17991.13821.12031.1146
DEPI 1.32251.31251.27671.21981.20011.22841.35811.53071.43281.3584
SGAI 0.71190.58650.56760.70580.75570.8961.00781.34681.35721.2674
LVGI 0.96711.00020.99561.0141.04230.97040.97570.97860.99540.8325
TATA -0.03290.0170.00580.03790.0338-0.00060.06840.08070.10680.2226
M-score -3.31-2.46-3.23-3.21-2.35-3.21-3.02-3.09-2.00-1.10
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