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Hovnanian Enterprises Inc (NYSE:HOV)
Beneish M-Score
-0.68 (As of Today)

Warning Sign:

Beneish M-Score -0.68 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 -0.68 signals that the company is a manipulator.

HOV' s 10-Year Beneish M-Score Range
Min: -81.56   Max: 2.27
Current: -0.68

-81.56
2.27

During the past 13 years, the highest Beneish M-Score of Hovnanian Enterprises Inc was 2.27. The lowest was -81.56. And the median was -2.24.


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 * 1.028+0.404 * 2.1058+0.892 * 1.1551+0.115 * 1.2174
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9701+4.679 * 0.2385-0.327 * 0.8286
=-0.68

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

This Year (Jan15) TTM:Last Year (Jan14) TTM:
Accounts Receivable was $0 Mil.
Revenue was 445.714 + 698.394 + 551.009 + 449.929 = $2,145 Mil.
Gross Profit was 70.037 + 127.121 + 110.296 + 79.86 = $387 Mil.
Total Current Assets was $1,780 Mil.
Total Assets was $2,461 Mil.
Property, Plant and Equipment(Net PPE) was $47 Mil.
Depreciation, Depletion and Amortization(DDA) was $3 Mil.
Selling, General & Admin. Expense(SGA) was $259 Mil.
Total Current Liabilities was $653 Mil.
Long-Term Debt was $1,907 Mil.
Net Income was -14.376 + 322.464 + 17.105 + -7.902 = $317 Mil.
Non Operating Income was -0.092 + -5.275 + -8.09 + -1.239 = $-15 Mil.
Cash Flow from Operations was -195.617 + 68.958 + -73.437 + -55.054 = $-255 Mil.
Accounts Receivable was $0 Mil.
Revenue was 364.048 + 591.687 + 478.357 + 422.998 = $1,857 Mil.
Gross Profit was 58.335 + 123.6 + 93.513 + 69.253 = $345 Mil.
Total Current Assets was $1,523 Mil.
Total Assets was $1,787 Mil.
Property, Plant and Equipment(Net PPE) was $46 Mil.
Depreciation, Depletion and Amortization(DDA) was $4 Mil.
Selling, General & Admin. Expense(SGA) was $231 Mil.
Total Current Liabilities was $450 Mil.
Long-Term Debt was $1,794 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 / 2145.046) / (0 / 1857.09)
=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)
=(127.121 / 1857.09) / (70.037 / 2145.046)
=0.18561351 / 0.1805621
=1.028

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 - (1779.763 + 46.967) / 2461.435) / (1 - (1522.76 + 45.647) / 1787.261)
=0.25785974 / 0.12245218
=2.1058

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
=2145.046 / 1857.09
=1.1551

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))
=(4.103 / (4.103 + 45.647)) / (3.413 / (3.413 + 46.967))
=0.08247236 / 0.06774514
=1.2174

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)
=(259.112 / 2145.046) / (231.246 / 1857.09)
=0.12079554 / 0.12452062
=0.9701

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)
=((1906.929 + 653.278) / 2461.435) / ((1793.512 + 449.873) / 1787.261)
=1.04012781 / 1.25520839
=0.8286

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
=(317.291 - -14.696 - -255.15) / 2461.435
=0.2385

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 -0.68 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

Oct12Jan13Apr13Jul13Oct13Jan14Apr14Jul14Oct14Jan15
DSRI 0.90320.03590.02061000111
GMI -0.1286-0.01360.22440.41590.61140.67260.80930.84091.02341.028
AQI 1.50571.1561.01080.86460.82530.81650.81680.92871.70922.1058
SGI 1.30881.36641.33651.30351.24631.17991.13821.12031.11461.1551
DEPI 1.31251.27671.21981.20011.22841.35811.53071.43281.35841.2174
SGAI 0.69280.71540.90370.95591.1311.22941.07621.09551.03880.9701
LVGI 1.00340.99561.0141.04230.95340.97570.97860.99540.84470.8286
TATA 0.0102-0.00490.02570.02010.01430.08370.09710.12280.22310.2385
M-score -2.55-3.45-3.33-2.46-3.37-3.09-2.94-1.88-0.95-0.68
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