Switch to:
Hovnanian Enterprises Inc (NYSE:HOV)
Beneish M-Score
-0.69 (As of Today)

Warning Sign:

Beneish M-Score -0.69 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 -0.69 signals that the company is a manipulator.

HOV' s 10-Year Beneish M-Score Range
Min: -81.56   Max: 2.27
Current: -0.69

-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 -2.23.


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 * 1.1017+0.404 * 2.1151+0.892 * 1.1486+0.115 * 1.0501
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9555+4.679 * 0.2304-0.327 * 0.8051
=-0.69

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

This Year (Apr15) TTM:Last Year (Apr14) TTM:
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 + 127.121 + 110.296 = $370 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.
Net Income was -19.559 + -14.376 + 322.464 + 17.105 = $306 Mil.
Non Operating Income was -0.322 + -0.092 + -5.275 + -8.09 = $-14 Mil.
Cash Flow from Operations was -60.512 + -195.617 + 68.958 + -73.437 = $-261 Mil.
Accounts Receivable was $0 Mil.
Revenue was 449.929 + 364.048 + 591.687 + 478.357 = $1,884 Mil.
Gross Profit was 79.86 + 58.335 + 123.6 + 93.513 = $355 Mil.
Total Current Assets was $1,570 Mil.
Total Assets was $1,839 Mil.
Property, Plant and Equipment(Net PPE) was $46 Mil.
Depreciation, Depletion and Amortization(DDA) was $4 Mil.
Selling, General & Admin. Expense(SGA) was $242 Mil.
Total Current Liabilities was $592 Mil.
Long-Term Debt was $1,706 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 / 2164.066) / (0 / 1884.021)
=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)
=(70.037 / 1884.021) / (62.978 / 2164.066)
=0.18859025 / 0.17117408
=1.1017

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 - (1823.932 + 46.414) / 2516.994) / (1 - (1569.586 + 45.884) / 1838.823)
=0.25691281 / 0.1214652
=2.1151

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
=2164.066 / 1884.021
=1.1486

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))
=(3.574 / (3.574 + 45.884)) / (3.43 / (3.43 + 46.414))
=0.07226333 / 0.0688147
=1.0501

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)
=(265.772 / 2164.066) / (242.166 / 1884.021)
=0.12281141 / 0.12853678
=0.9555

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)
=((1908.38 + 623.97) / 2516.994) / ((1706.172 + 591.741) / 1838.823)
=1.00610093 / 1.24966514
=0.8051

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
=(305.634 - -13.779 - -260.608) / 2516.994
=0.2304

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 -0.69 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 0.96081.15485.9933-0.2260.4522-20.85140.87610.14140.76061.0086
AQI 0.90471.19150.69150.51722.2861.11041.07291.50570.82531.7092
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 0.97971.07121.11821.32451.31971.03031.09161.00340.95340.8447
TATA 0.10080.2046-0.1455-0.4262-0.5076-0.0254-0.04520.0170.02310.2289
M-score -1.13-1.61-0.48-5.61-4.99-13.63-2.88-2.37-3.22-0.93

Hovnanian Enterprises Inc Quarterly Data

Jan13Apr13Jul13Oct13Jan14Apr14Jul14Oct14Jan15Apr15
DSRI 0.03590.020610001111
GMI -0.01360.22440.41590.61140.67260.80930.84091.02341.0281.1017
AQI 1.1561.01080.86460.82530.81650.81680.92871.70922.10582.1151
SGI 1.36641.33651.30351.24631.17991.13821.12031.11461.15511.1486
DEPI 1.27671.21981.20011.22841.35811.53071.43281.35841.21741.0501
SGAI 0.71540.90370.95591.1311.22941.07621.09551.03880.97010.9555
LVGI 0.99561.0141.04230.95340.97570.97860.99540.84470.82860.8051
TATA -0.00490.02570.02010.01430.08370.09710.12280.22310.23850.2304
M-score -3.45-3.33-2.46-3.37-3.09-2.94-1.88-0.95-0.68-0.69
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GuruFocus Premium Plus Membership

FEEDBACK