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Applied Materials Inc (NAS:AMAT)
Beneish M-Score
-2.40 (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.

Applied Materials Inc has a M-score of -2.40 suggests that the company is not a manipulator.

AMAT' s 10-Year Beneish M-Score Range
Min: -3.61   Max: 0.04
Current: -2.4

-3.61
0.04

During the past 13 years, the highest Beneish M-Score of Applied Materials Inc was 0.04. The lowest was -3.61. And the median was -2.55.


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 Applied Materials 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 * 1.1013+0.528 * 0.9284+0.404 * 0.869+0.892 * 1.2273+0.115 * 1.0345
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8166+4.679 * -0.0314-0.327 * 1.0365
=-2.40

* 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 $1,622 Mil.
Revenue was 2265 + 2353 + 2190 + 1988 = $8,796 Mil.
Gross Profit was 992 + 1001 + 891 + 795 = $3,679 Mil.
Total Current Assets was $6,640 Mil.
Total Assets was $12,851 Mil.
Property, Plant and Equipment(Net PPE) was $849 Mil.
Depreciation, Depletion and Amortization(DDA) was $379 Mil.
Selling, General & Admin. Expense(SGA) was $921 Mil.
Total Current Liabilities was $2,755 Mil.
Long-Term Debt was $1,947 Mil.
Net Income was 301 + 262 + 253 + 183 = $999 Mil.
Non Operating Income was 0 + 0 + -3 + -6 = $-9 Mil.
Cash Flow from Operations was 584 + 437 + 372 + 19 = $1,412 Mil.
Accounts Receivable was $1,200 Mil.
Revenue was 1975 + 1973 + 1573 + 1646 = $7,167 Mil.
Gross Profit was 806 + 808 + 582 + 587 = $2,783 Mil.
Total Current Assets was $5,237 Mil.
Total Assets was $11,751 Mil.
Property, Plant and Equipment(Net PPE) was $872 Mil.
Depreciation, Depletion and Amortization(DDA) was $409 Mil.
Selling, General & Admin. Expense(SGA) was $919 Mil.
Total Current Liabilities was $2,202 Mil.
Long-Term Debt was $1,946 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)
=(1622 / 8796) / (1200 / 7167)
=0.184402 / 0.16743407
=1.1013

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)
=(1001 / 7167) / (992 / 8796)
=0.38830752 / 0.4182583
=0.9284

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 - (6640 + 849) / 12851) / (1 - (5237 + 872) / 11751)
=0.41724379 / 0.48012935
=0.869

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
=8796 / 7167
=1.2273

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))
=(409 / (409 + 872)) / (379 / (379 + 849))
=0.31928181 / 0.30863192
=1.0345

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)
=(921 / 8796) / (919 / 7167)
=0.10470668 / 0.12822659
=0.8166

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)
=((1947 + 2755) / 12851) / ((1946 + 2202) / 11751)
=0.36588592 / 0.35299123
=1.0365

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
=(999 - -9 - 1412) / 12851
=-0.0314

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.

Applied Materials Inc has a M-score of -2.40 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 own currency.

Applied Materials Inc Annual Data

Oct04Oct05Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13
DSRI 1.02231.10860.95660.95251.06151.09450.78430.75931.02911.457
GMI 0.77581.04660.94271.01451.08971.4840.73350.93841.0910.9539
AQI 1.04377.26870.89381.12421.04760.98921.00640.64832.64210.916
SGI 1.78970.87261.31111.06190.83510.61671.90461.10140.8290.8612
DEPI 0.94291.09910.91341.02710.89861.07370.87621.08730.69830.9736
SGAI 0.6711.06340.99170.98911.21351.2340.67330.86841.44050.9734
LVGI 1.0970.86411.44460.87011.17990.78171.26411.21051.01731.0474
TATA -0.0206-0.0152-0.0439-0.0441-0.0713-0.0542-0.0705-0.0361-0.1425-0.03
M-score -1.930.04-2.67-2.57-2.94-2.70-2.38-2.99-2.68-2.40

Applied Materials Inc Quarterly Data

Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14Jul14
DSRI 0.99511.02731.0290.87010.95681.00941.4571.35771.07811.1013
GMI 1.01711.08921.09081.04281.02420.99570.95420.94510.93950.9284
AQI 1.82782.32612.64211.08291.02280.97820.9160.84750.86660.869
SGI 0.88540.82460.82910.80880.7770.77450.86121.00281.12891.2273
DEPI 0.87340.78140.69830.7460.83110.92440.97360.9881.02391.0345
SGAI 1.26481.39551.43881.26031.18861.11840.97340.86490.81160.8166
LVGI 1.15020.88231.01731.02221.06691.07991.04741.0861.03531.0365
TATA -0.0534-0.0793-0.1425-0.1403-0.1441-0.1228-0.03-0.0406-0.0252-0.0314
M-score -2.60-2.45-2.68-3.45-3.44-3.31-2.40-2.44-2.47-2.40
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