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Hovnanian Enterprises Inc (NYSE:HOV)
Beneish M-Score
-3.07 (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 -3.07 suggests that the company is not a manipulator.

HOV' s 10-Year Beneish M-Score Range
Min: -432.26   Max: 21.27
Current: -3.07

-432.26
21.27

During the past 13 years, the highest Beneish M-Score of Hovnanian Enterprises Inc was 21.27. The lowest was -432.26. And the median was -2.25.


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 * 0.7344+0.404 * 0.8168+0.892 * 1.1382+0.115 * 1.5307
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.3119+4.679 * 0.0872-0.327 * 0.9786
=-3.07

* 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 31.451 + 58.511 + 58.016 + 66.846 = $215 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 $162 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)
=0.12978232 / 0.17670769
=0.7344

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) / (162.182 / 1655.264)
=0.12853678 / 0.09797954
=1.3119

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 -3.07 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 1.02761.85432.27981.09940.9802011.03550.90320
GMI 1.0390.91971.15485.9933-0.2260.4755-19.82710.87610.14140.8291
AQI 0.73440.90591.190.69150.51722.8870.87931.07291.38970.8942
SGI 1.29941.28561.14950.78050.68930.48250.85940.82731.30881.2463
DEPI 0.82371.21140.93810.61931.6861.86311.20071.11881.31251.2284
SGAI 0.96021.12511.17881.0161.16351.31890.8621.07260.70310.9081
LVGI 0.92541.03811.0111.11821.32451.28671.05671.08031.00120.9795
TATA 0.17230.10090.2046-0.1455-0.4262-0.5192-0.0254-0.05120.01450.0061
M-score -1.46-1.06-0.09-0.84-5.67-5.85-13.74-2.90-2.44-3.24

Hovnanian Enterprises Inc Quarterly Data

Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14
DSRI 1.18051.068500.90320.03590.02061000
GMI 0.0092-0.5674-0.12780.17420.29950.29610.50890.78160.81480.7344
AQI 2.20092.18812.4791.38971.14331.01080.86460.89420.82570.8168
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 1.04940.76620.71190.60170.58250.72450.77480.87330.9821.3119
LVGI 1.06241.0690.96711.00120.99561.0141.04230.97950.97570.9786
TATA -0.013-0.0506-0.03880.01450.00310.03530.02620.00610.0750.0872
M-score -2.53-2.97-3.33-2.40-3.23-3.21-2.35-3.26-3.00-3.07
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