Will AV Homes Disappoint Analysts Next Quarter?

Look here for a clue.

Seth Jayson
Seth Jayson
Jun 27, 2013 at 12:00AM

There's no foolproof way to know the future for AV Homes (Nasdaq: AVHI) or any other company. However, certain clues may help you see potential stumbles before they happen -- and before your stock craters as a result.

A cloudy crystal ball


Why might an upstanding firm like AV Homes do this? For the same reason any other company might: to make the numbers. Investors don't like revenue shortfalls, and employees don't like reporting them to their superiors.




Watching the trends
When that red line (AR growth) crosses above the green line (revenue growth), I know I need to consult the filings. Similarly, a spike in the blue bars indicates a trend worth worrying about. AV Homes's latest average DSO stands at 23.5 days, and the end-of-quarter figure is 22.8 days. Differences in business models can generate variations in DSO, and business needs can require occasional fluctuations, but all things being equal, I like to see this figure stay steady. So, let's get back to our original question: Based on DSO and sales, does AV Homes look like it might miss its numbers in the next quarter or two?

The numbers don't paint a clear picture. For the last fully reported fiscal quarter, AV Homes's year-over-year revenue shrank 5.9%, and its AR dropped 33.5%. That looks OK. End-of-quarter DSO decreased 30.1% from the prior-year quarter. It was up 22.0% versus the prior quarter. That looks like seasonality. Still, I'm no fortuneteller, and these are just numbers. Investors putting their money on the line always need to dig into the filings for the root causes and draw their own conclusions.

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