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Hovnanian Enterprises Inc (NYSE:HOV)
Beneish M-Score
-2.03 (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 -2.03 signals that the company is a manipulator.

HOV' s 10-Year Beneish M-Score Range
Min: -432.26   Max: 21.27
Current: -2.03

-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 * 1+0.528 * 0.7736+0.404 * 0.9287+0.892 * 1.1203+0.115 * 1.4328
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.3237+4.679 * 0.1064-0.327 * 0.9954
=-2.03

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

This Year (Jul14) TTM:Last Year (Jul13) TTM:
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 + 94.541 = $350 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.
Net Income was 17.105 + -7.902 + -24.523 + 32.819 = $17 Mil.
Non Operating Income was -8.09 + -1.239 + 2.571 + 25.604 = $19 Mil.
Cash Flow from Operations was -73.437 + -55.054 + -131.052 + 56.665 = $-203 Mil.
Accounts Receivable was $0 Mil.
Revenue was 478.357 + 422.998 + 358.211 + 487.044 = $1,747 Mil.
Gross Profit was 93.513 + 31.451 + 58.511 + 58.016 = $241 Mil.
Total Current Assets was $1,369 Mil.
Total Assets was $1,664 Mil.
Property, Plant and Equipment(Net PPE) was $47 Mil.
Depreciation, Depletion and Amortization(DDA) was $5 Mil.
Selling, General & Admin. Expense(SGA) was $170 Mil.
Total Current Liabilities was $411 Mil.
Long-Term Debt was $1,626 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 / 1956.673) / (0 / 1746.61)
=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)
=(79.86 / 1746.61) / (110.296 / 1956.673)
=0.13826269 / 0.17872378
=0.7736

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 - (1585.746 + 45.96) / 1893.728) / (1 - (1369.286 + 46.906) / 1664.126)
=0.13836306 / 0.14898752
=0.9287

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
=1956.673 / 1746.61
=1.1203

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))
=(5.294 / (5.294 + 46.906)) / (3.501 / (3.501 + 45.96))
=0.10141762 / 0.07078304
=1.4328

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)
=(252.733 / 1956.673) / (170.426 / 1746.61)
=0.12916466 / 0.0975753
=1.3237

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)
=((1656.153 + 650.957) / 1893.728) / ((1625.538 + 411.308) / 1664.126)
=1.21829006 / 1.22397343
=0.9954

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
=(17.499 - 18.846 - -202.878) / 1893.728
=0.1064

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 -2.03 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

Oct04Oct05Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13
DSRI 1.02761.71860.65741.48541.0401011.03550.90320
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 -1.46-1.18-1.59-0.48-5.61-5.85-13.74-2.90-2.44-3.24

Hovnanian Enterprises Inc Quarterly Data

Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14Jul14
DSRI 1.068500.90320.03590.020610001
GMI -0.5674-0.12780.17420.29950.29610.50890.78160.81480.73440.7736
AQI 2.18812.4791.38971.14331.01080.86460.89420.82570.81680.9287
SGI 0.99781.16891.30881.36641.33651.30351.24631.17991.13821.1203
DEPI 1.14181.32251.31251.27671.21981.20011.22841.35811.53071.4328
SGAI 0.76620.71190.60170.58250.72450.77480.87330.9821.31191.3237
LVGI 1.0690.96711.00120.99561.0141.04230.97950.97570.97860.9954
TATA -0.0506-0.03880.01450.00310.03530.0313-0.00110.06790.08030.1064
M-score -2.97-3.33-2.40-3.23-3.21-2.33-3.29-3.04-3.10-2.03
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