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GuruFocus has detected 4 Warning Signs with Hovnanian Enterprises Inc $HOV.
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Hovnanian Enterprises Inc (NYSE:HOV)
Beneish M-Score
-2.78 (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 -2.78 suggests that the company is not a manipulator.

HOV' s Beneish M-Score Range Over the Past 10 Years
Min: -13.94   Max: -0.44
Current: -2.78

-13.94
-0.44

During the past 13 years, the highest Beneish M-Score of Hovnanian Enterprises Inc was -0.44. The lowest was -13.94. And the median was -2.18.


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 * 1.1522+0.404 * 1.1679+0.892 * 1.281+0.115 * 1.047
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.7874+4.679 * -0.1578-0.327 * 1.0065
=-2.78

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Oct16) TTM:Last Year (Oct15) TTM:
Accounts Receivable was $0 Mil.
Revenue was 805.069 + 716.85 + 654.723 + 575.605 = $2,752 Mil.
Gross Profit was 112.06 + 94.18 + 77.942 + 74.72 = $359 Mil.
Total Current Assets was $1,634 Mil.
Total Assets was $2,379 Mil.
Property, Plant and Equipment(Net PPE) was $50 Mil.
Depreciation, Depletion and Amortization(DDA) was $4 Mil.
Selling, General & Admin. Expense(SGA) was $253 Mil.
Total Current Liabilities was $830 Mil.
Long-Term Debt was $1,645 Mil.
Net Income was 22.289 + -0.474 + -8.461 + -16.173 = $-3 Mil.
Non Operating Income was -7.193 + -2.401 + -2.493 + -2.864 = $-15 Mil.
Cash Flow from Operations was 193.109 + 225.743 + 33.894 + -65.081 = $388 Mil.
Accounts Receivable was $0 Mil.
Revenue was 693.204 + 540.613 + 468.949 + 445.714 = $2,148 Mil.
Gross Profit was 107.454 + 82.344 + 62.978 + 70.037 = $323 Mil.
Total Current Assets was $1,906 Mil.
Total Assets was $2,602 Mil.
Property, Plant and Equipment(Net PPE) was $46 Mil.
Depreciation, Depletion and Amortization(DDA) was $3 Mil.
Selling, General & Admin. Expense(SGA) was $251 Mil.
Total Current Liabilities was $795 Mil.
Long-Term Debt was $1,895 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 / 2752.247) / (0 / 2148.48)
=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)
=(322.813 / 2148.48) / (358.902 / 2752.247)
=0.15025181 / 0.13040327
=1.1522

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 - (1633.763 + 50.332) / 2379.44) / (1 - (1905.622 + 45.534) / 2602.298)
=0.29223052 / 0.25021808
=1.1679

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
=2752.247 / 2148.48
=1.281

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))
=(3.388 / (3.388 + 45.534)) / (3.565 / (3.565 + 50.332))
=0.0692531 / 0.06614468
=1.047

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)
=(253.079 / 2752.247) / (250.909 / 2148.48)
=0.09195359 / 0.11678442
=0.7874

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)
=((1645.49 + 830.035) / 2379.44) / ((1895.247 + 794.747) / 2602.298)
=1.04038135 / 1.03369945
=1.0065

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
=(-2.819 - -14.951 - 387.665) / 2379.44
=-0.1578

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 -2.78 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 local exchange's currency.

Hovnanian Enterprises Inc Annual Data

Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Oct15Oct16
DSRI 1.48541.04011.16871.59861.035501111
GMI 5.9933-0.2260.4522-20.85140.87610.12740.92040.99891.16241.1522
AQI 0.69150.51722.2861.11041.07291.50570.82531.7740.90851.1679
SGI 0.78050.68930.48250.85940.82731.30881.24631.11461.04121.281
DEPI 0.61931.6861.86311.20071.11881.31251.22841.35840.98361.047
SGAI 1.0161.16351.31890.8621.07260.68790.92821.03880.94530.7874
LVGI 1.11821.32451.31971.03031.09161.00340.95340.84470.99651.0065
TATA -0.1455-0.4262-0.5076-0.0254-0.04520.03110.00660.21640.1177-0.1589
M-score -0.48-5.61-4.99-13.63-2.88-3.15-2.29-0.97-1.84-2.78

Hovnanian Enterprises Inc Quarterly Data

Jul14Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16
DSRI 1111111111
GMI 1.01060.97680.97991.0551.10521.16241.20671.1811.15731.1522
AQI 0.92871.7742.10582.11511.91060.90851.06461.02141.04911.1679
SGI 1.12031.11461.15511.14861.10071.04121.06221.13871.2261.281
DEPI 1.43281.35841.21741.05011.02540.98360.98340.99371.03851.047
SGAI 1.09551.03880.97010.95550.95870.94530.9090.82620.76080.7874
LVGI 0.99540.84470.82860.80510.85980.99650.9130.96711.00331.0065
TATA 0.10360.21640.23230.22440.21290.1190.07050.0393-0.0813-0.1578
M-score -1.88-0.98-0.73-0.74-0.91-1.83-1.92-2.03-2.51-2.78
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