Switch to:
Hovnanian Enterprises Inc (NYSE:HOV)
Beneish M-Score
-0.96 (As of Today)

Warning Sign:

Beneish M-Score -0.96 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 -0.96 signals that the company is a manipulator.

HOV' s 10-Year Beneish M-Score Range
Min: -13.88   Max: -0.44
Current: -0.96

-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 * 1.0055+0.404 * 1.7092+0.892 * 1.1146+0.115 * 1.3584
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0388+4.679 * 0.2226-0.327 * 0.8447
=-0.96

* 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 123.6 + 93.513 + 69.253 + 58.511 = $345 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 $220 Mil.
Total Current Liabilities was $631 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 / 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)
=0.18629382 / 0.18527077
=1.0055

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) / (220.166 / 1851.253)
=0.12354099 / 0.1189281
=1.0388

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) / ((1529.445 + 630.922) / 1759.13)
=1.03737101 / 1.22808832
=0.8447

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 -0.96 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

Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14Jul14Oct14
DSRI 00.90320.03590.0206100011
GMI -0.3283-0.1637-0.05160.19550.36440.63010.65980.79440.82611.0055
AQI 2.4791.50571.14331.01080.86460.82530.82570.81680.92871.7092
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 0.83320.7130.69250.87490.92571.09331.22941.07621.09551.0388
LVGI 0.96711.00340.99561.0141.04230.95340.97570.97860.99540.8447
TATA -0.0310.007-0.00490.02570.02010.01430.08310.09650.12220.2226
M-score -3.42-2.59-3.47-3.34-2.48-3.35-3.09-2.95-1.89-0.96
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)
Free 7-day Trial
FEEDBACK