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Hovnanian Enterprises Inc (NYSE:HOV)
Beneish M-Score
-0.84 (As of Today)

Warning Sign:

Beneish M-Score -0.84 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 -0.84 signals that the company is a manipulator.

HOV' s Beneish M-Score Range Over the Past 10 Years
Min: -11.82   Max: -0.44
Current: -0.84

-11.82
-0.44

During the past 13 years, the highest Beneish M-Score of Hovnanian Enterprises Inc was -0.44. The lowest was -11.82. And the median was -1.84.


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 * 1.2465+0.404 * 1.9106+0.892 * 1.1007+0.115 * 1.0254
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9587+4.679 * 0.2135-0.327 * 0.8598
=-0.84

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

This Year (Jul15) TTM:Last Year (Jul14) TTM:
Accounts Receivable was $0 Mil.
Revenue was 540.613 + 468.949 + 445.714 + 698.394 = $2,154 Mil.
Gross Profit was 82.344 + 62.978 + 70.037 + 119.096 = $334 Mil.
Total Current Assets was $1,830 Mil.
Total Assets was $2,549 Mil.
Property, Plant and Equipment(Net PPE) was $46 Mil.
Depreciation, Depletion and Amortization(DDA) was $3 Mil.
Selling, General & Admin. Expense(SGA) was $267 Mil.
Total Current Liabilities was $763 Mil.
Long-Term Debt was $1,908 Mil.
Net Income was -7.684 + -19.559 + -14.376 + 322.464 = $281 Mil.
Non Operating Income was -1.98 + -0.322 + -0.092 + 2.75 = $0 Mil.
Cash Flow from Operations was -76.551 + -60.512 + -195.617 + 68.958 = $-264 Mil.
Accounts Receivable was $0 Mil.
Revenue was 551.009 + 449.929 + 364.048 + 591.687 = $1,957 Mil.
Gross Profit was 110.296 + 79.86 + 65.007 + 123.6 = $379 Mil.
Total Current Assets was $1,586 Mil.
Total Assets was $1,894 Mil.
Property, Plant and Equipment(Net PPE) was $46 Mil.
Depreciation, Depletion and Amortization(DDA) was $4 Mil.
Selling, General & Admin. Expense(SGA) was $253 Mil.
Total Current Liabilities was $651 Mil.
Long-Term Debt was $1,656 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 / 2153.67) / (0 / 1956.673)
=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)
=(62.978 / 1956.673) / (82.344 / 2153.67)
=0.19357501 / 0.15529538
=1.2465

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 - (1829.563 + 45.839) / 2549.344) / (1 - (1585.746 + 45.96) / 1893.728)
=0.26435899 / 0.13836306
=1.9106

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
=2153.67 / 1956.673
=1.1007

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))
=(3.501 / (3.501 + 45.96)) / (3.399 / (3.399 + 45.839))
=0.07078304 / 0.06903205
=1.0254

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)
=(266.69 / 2153.67) / (252.733 / 1956.673)
=0.12383048 / 0.12916466
=0.9587

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)
=((1907.693 + 762.559) / 2549.344) / ((1656.153 + 650.957) / 1893.728)
=1.0474271 / 1.21829006
=0.8598

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
=(280.845 - 0.356 - -263.722) / 2549.344
=0.2135

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 -0.84 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 0.65741.48541.04011.16871.59861.03550.9032011
GMI 1.15485.9933-0.2260.4755-19.82710.87610.14140.82910.92541.2547
AQI 1.19150.69150.51722.8870.87931.07291.2121.02531.70920.955
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 1.07121.11821.32451.28671.05671.09161.00020.97040.83250.9965
TATA 0.2046-0.1455-0.4262-0.5192-0.0254-0.04520.0170.00660.22890.1177
M-score -1.61-0.48-5.61-4.78-13.19-2.88-2.49-3.18-0.97-1.77

Hovnanian Enterprises Inc Quarterly Data

Jul13Oct13Jan14Apr14Jul14Oct14Jan15Apr15Jul15Oct15
DSRI 1010111111
GMI 0.46220.67820.68840.63290.69230.89240.95491.14731.24651.3594
AQI 0.86461.02530.81650.81680.92871.70922.10582.11511.91060.955
SGI 1.30351.24631.17991.13821.12031.11461.15511.14861.10071.0412
DEPI 1.20011.22841.35811.53071.43281.35841.21741.05011.02540.9836
SGAI 0.76740.92241.01351.35451.36461.27381.17680.95550.95870.9453
LVGI 1.04230.97040.97570.97860.99540.83250.82860.80510.85980.9965
TATA 0.02230.01640.08460.09650.12220.21910.23530.22730.21350.1177
M-score -2.39-3.21-2.12-3.09-2.00-1.07-0.77-0.68-0.84-1.71
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