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Hovnanian Enterprises Inc (NYSE:HOV)
Beneish M-Score
-2.96 (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 -2.96 suggests that the company is not a manipulator.

HOV' s 10-Year Beneish M-Score Range
Min: -81.77   Max: 2.26
Current: -2.96

-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 -2.23.


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 * 0+0.528 * 0.8637+0.404 * 0.8168+0.892 * 1.1382+0.115 * 1.5307
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0762+4.679 * 0.0872-0.327 * 0.9786
=-2.96

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

This Year (Apr14) TTM:Last Year (Apr13) TTM:
Accounts Receivable was $0 Mil.
Revenue was 449.929 + 364.048 + 591.687 + 478.357 = $1,884 Mil.
Gross Profit was 79.86 + 65.007 + 94.541 + 93.513 = $333 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.
Net Income was -7.902 + -24.523 + 32.819 + 8.466 = $9 Mil.
Non Operating Income was -1.239 + 2.571 + 4.474 + 3.69 = $9 Mil.
Cash Flow from Operations was -55.054 + -131.052 + 56.665 + -31.477 = $-161 Mil.
Accounts Receivable was $1 Mil.
Revenue was 422.998 + 358.211 + 487.044 + 387.011 = $1,655 Mil.
Gross Profit was 69.253 + 58.511 + 58.016 + 66.846 = $253 Mil.
Total Current Assets was $1,331 Mil.
Total Assets was $1,619 Mil.
Property, Plant and Equipment(Net PPE) was $47 Mil.
Depreciation, Depletion and Amortization(DDA) was $6 Mil.
Selling, General & Admin. Expense(SGA) was $198 Mil.
Total Current Liabilities was $538 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 / 1884.021) / (1.483 / 1655.264)
=0 / 0.00089593
=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)
=(65.007 / 1655.264) / (79.86 / 1884.021)
=0.15261976 / 0.17670769
=0.8637

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 - (1569.586 + 45.884) / 1838.823) / (1 - (1331.117 + 47.037) / 1618.887)
=0.1214652 / 0.14870278
=0.8168

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
=1884.021 / 1655.264
=1.1382

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))
=(5.85 / (5.85 + 47.037)) / (3.574 / (3.574 + 45.884))
=0.11061319 / 0.07226333
=1.5307

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)
=(242.166 / 1884.021) / (197.693 / 1655.264)
=0.12853678 / 0.11943291
=1.0762

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)
=((1706.172 + 591.741) / 1838.823) / ((1529.194 + 538.194) / 1618.887)
=1.24966514 / 1.27704281
=0.9786

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
=(8.86 - 9.496 - -160.918) / 1838.823
=0.0872

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 -2.96 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

Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14
DSRI 1.18051.068500.90320.03590.02061000
GMI -2.0166-1.3611-0.3283-0.1637-0.05160.19550.36440.6880.71930.8637
AQI 2.20092.18812.4791.43091.14331.01080.86460.82530.82570.8168
SGI 0.88290.99781.16891.30881.36641.33651.30351.24631.17991.1382
DEPI 1.11091.14181.32251.31251.27671.21981.20011.22841.35811.5307
SGAI 0.80820.88370.81170.69380.67330.85070.90031.09331.22941.0762
LVGI 1.06241.0690.96711.01390.99561.0141.04230.96730.97570.9786
TATA -0.0076-0.0475-0.03590.01450.00310.03350.02450.00450.07340.0872
M-score -3.54-3.39-3.44-2.58-3.43-3.30-2.46-3.37-3.11-2.96
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