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GuruFocus has detected 2 Warning Signs with Hovnanian Enterprises Inc $HOV.
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Hovnanian Enterprises Inc (NYSE:HOV)
Beneish M-Score
-3.24 (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 -3.24 suggests that the company is not a manipulator.

HOV' s Beneish M-Score Range Over the Past 10 Years
Min: -81.56   Max: 2.23
Current: -3.24

-81.56
2.23

During the past 13 years, the highest Beneish M-Score of Hovnanian Enterprises Inc was 2.23. The lowest was -81.56. 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 * 1.0811+0.404 * 1.0261+0.892 * 1.1976+0.115 * 0.9965
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8321+4.679 * -0.2134-0.327 * 1.0736
=-3.24

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

This Year (Jan17) TTM:Last Year (Jan16) TTM:
Accounts Receivable was $0 Mil.
Revenue was 552.009 + 805.069 + 716.85 + 654.723 = $2,729 Mil.
Gross Profit was 78.621 + 112.06 + 94.18 + 77.942 = $363 Mil.
Total Current Assets was $1,491 Mil.
Total Assets was $2,145 Mil.
Property, Plant and Equipment(Net PPE) was $50 Mil.
Depreciation, Depletion and Amortization(DDA) was $4 Mil.
Selling, General & Admin. Expense(SGA) was $249 Mil.
Total Current Liabilities was $568 Mil.
Long-Term Debt was $1,620 Mil.
Net Income was -0.143 + 22.289 + -0.474 + -8.461 = $13 Mil.
Non Operating Income was 4.393 + -7.193 + -2.401 + -2.493 = $-8 Mil.
Cash Flow from Operations was 25.916 + 193.109 + 225.743 + 33.894 = $479 Mil.
Accounts Receivable was $0 Mil.
Revenue was 575.605 + 693.204 + 540.613 + 468.949 = $2,278 Mil.
Gross Profit was 74.72 + 107.454 + 82.344 + 62.978 = $327 Mil.
Total Current Assets was $1,806 Mil.
Total Assets was $2,553 Mil.
Property, Plant and Equipment(Net PPE) was $46 Mil.
Depreciation, Depletion and Amortization(DDA) was $3 Mil.
Selling, General & Admin. Expense(SGA) was $250 Mil.
Total Current Liabilities was $703 Mil.
Long-Term Debt was $1,722 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 / 2728.651) / (0 / 2278.371)
=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)
=(327.496 / 2278.371) / (362.803 / 2728.651)
=0.1437413 / 0.13296057
=1.0811

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 - (1491.042 + 49.998) / 2145.296) / (1 - (1805.975 + 46.01) / 2552.74)
=0.28166556 / 0.27451092
=1.0261

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
=2728.651 / 2278.371
=1.1976

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))
=(3.404 / (3.404 + 46.01)) / (3.713 / (3.713 + 49.998))
=0.06888736 / 0.06912923
=0.9965

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)
=(249.318 / 2728.651) / (250.18 / 2278.371)
=0.09137042 / 0.10980652
=0.8321

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)
=((1619.673 + 567.533) / 2145.296) / ((1721.527 + 702.772) / 2552.74)
=1.01953577 / 0.94968504
=1.0736

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
=(13.211 - -7.694 - 478.662) / 2145.296
=-0.2134

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 -3.24 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

Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17
DSRI 1111111111
GMI 0.97680.97991.0551.10521.16241.20671.1811.15731.15221.0811
AQI 1.7742.10582.11511.91060.90851.06461.02141.04911.16791.0261
SGI 1.11461.15511.14861.10071.04121.06221.13871.2261.2811.1976
DEPI 1.35841.21741.05011.02540.98360.98340.99371.03851.0470.9965
SGAI 1.03880.97010.95550.95870.94530.9090.82620.76080.78740.8321
LVGI 0.84470.82860.80510.85980.99650.9130.96711.00331.00651.0736
TATA 0.21640.23230.22440.21290.1190.07050.0393-0.0813-0.1578-0.2134
M-score -0.98-0.73-0.74-0.91-1.83-1.92-2.03-2.51-2.78-3.24
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