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Hovnanian Enterprises Inc (NYSE:HOV)
Beneish M-Score
-1.92 (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 -1.92 signals that the company is a manipulator.

HOV' s Beneish M-Score Range Over the Past 10 Years
Min: -81.56   Max: 2.27
Current: -1.92

-81.56
2.27

During the past 13 years, the highest Beneish M-Score of Hovnanian Enterprises Inc was 2.27. The lowest was -81.56. And the median was -2.18.


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 * 1.2067+0.404 * 1.0646+0.892 * 1.0622+0.115 * 0.9834
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.909+4.679 * 0.0692-0.327 * 0.913
=-1.92

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

This Year (Jan16) TTM:Last Year (Jan15) TTM:
Accounts Receivable was $0 Mil.
Revenue was 575.605 + 693.204 + 540.613 + 468.949 = $2,278 Mil.
Gross Profit was 74.72 + 107.454 + 82.344 + 62.978 = $327 Mil.
Total Current Assets was $1,806 Mil.
Total Assets was $2,553 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 $703 Mil.
Long-Term Debt was $1,722 Mil.
Net Income was -16.173 + 25.519 + -7.684 + -19.559 = $-18 Mil.
Non Operating Income was -2.864 + 0.56 + -1.98 + -0.322 = $-5 Mil.
Cash Flow from Operations was -65.081 + 12.145 + -76.551 + -60.512 = $-190 Mil.
Accounts Receivable was $0 Mil.
Revenue was 445.714 + 698.394 + 551.009 + 449.929 = $2,145 Mil.
Gross Profit was 70.037 + 119.096 + 103.084 + 79.86 = $372 Mil.
Total Current Assets was $1,780 Mil.
Total Assets was $2,461 Mil.
Property, Plant and Equipment(Net PPE) was $47 Mil.
Depreciation, Depletion and Amortization(DDA) was $3 Mil.
Selling, General & Admin. Expense(SGA) was $259 Mil.
Total Current Liabilities was $653 Mil.
Long-Term Debt was $1,907 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 / 2278.371) / (0 / 2145.046)
=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)
=(107.454 / 2145.046) / (74.72 / 2278.371)
=0.17345875 / 0.1437413
=1.2067

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 - (1805.975 + 46.01) / 2552.74) / (1 - (1779.763 + 46.967) / 2461.435)
=0.27451092 / 0.25785974
=1.0646

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
=2278.371 / 2145.046
=1.0622

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))
=(3.413 / (3.413 + 46.967)) / (3.404 / (3.404 + 46.01))
=0.06774514 / 0.06888736
=0.9834

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)
=(250.18 / 2278.371) / (259.112 / 2145.046)
=0.10980652 / 0.12079554
=0.909

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)
=((1721.527 + 702.772) / 2552.74) / ((1906.929 + 653.278) / 2461.435)
=0.94968504 / 1.04012781
=0.913

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
=(-17.897 - -4.606 - -189.999) / 2552.74
=0.0692

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 -1.92 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

Oct13Jan14Apr14Jul14Oct14Jan15Apr15Jul15Oct15Jan16
DSRI 1101111111
GMI 0.76090.82290.96381.01060.97680.97991.0551.10521.16241.2067
AQI 0.82530.81650.81680.92871.7742.10582.11511.91060.92021.0646
SGI 1.24631.17991.13821.12031.11461.15511.14861.10071.04121.0622
DEPI 1.22841.35811.53071.43281.35841.21741.05011.02540.98360.9834
SGAI 1.1311.22941.07621.09551.03880.97010.95550.95870.94530.909
LVGI 0.95340.97570.97860.99540.84470.82860.80510.85980.99650.913
TATA -0.00220.06740.08130.10360.21640.23230.22440.21350.11770.0692
M-score -2.45-2.16-2.93-1.88-0.98-0.73-0.74-0.91-1.83-1.92
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