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Applied Materials Inc (NAS:AMAT)
Beneish M-Score
-2.44 (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 -2.44 suggests that the company is not a manipulator.

AMAT' s 10-Year Beneish M-Score Range
Min: -3.61   Max: 0.04
Current: -2.44

-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 -2.57.


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 * 1.3577+0.528 * 0.9451+0.404 * 0.8475+0.892 * 1.0028+0.115 * 0.988
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8649+4.679 * -0.0407-0.327 * 1.086
=-2.44

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

This Year (Jan14) TTM:Last Year (Jan13) TTM:
Accounts Receivable was $1,510 Mil.
Revenue was 2190 + 1988 + 1975 + 1973 = $8,126 Mil.
Gross Profit was 891 + 795 + 806 + 808 = $3,300 Mil.
Total Current Assets was $6,014 Mil.
Total Assets was $12,199 Mil.
Property, Plant and Equipment(Net PPE) was $846 Mil.
Depreciation, Depletion and Amortization(DDA) was $398 Mil.
Selling, General & Admin. Expense(SGA) was $870 Mil.
Total Current Liabilities was $2,477 Mil.
Long-Term Debt was $1,946 Mil.
Net Income was 253 + 183 + 168 + -129 = $475 Mil.
Non Operating Income was -3 + -1 + -3 + 0 = $-7 Mil.
Cash Flow from Operations was 372 + 19 + 364 + 224 = $979 Mil.
Accounts Receivable was $1,109 Mil.
Revenue was 1573 + 1646 + 2343 + 2541 = $8,103 Mil.
Gross Profit was 582 + 587 + 930 + 1011 = $3,110 Mil.
Total Current Assets was $4,765 Mil.
Total Assets was $11,714 Mil.
Property, Plant and Equipment(Net PPE) was $900 Mil.
Depreciation, Depletion and Amortization(DDA) was $416 Mil.
Selling, General & Admin. Expense(SGA) was $1,003 Mil.
Total Current Liabilities was $1,965 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)
=(1510 / 8126) / (1109 / 8103)
=0.18582328 / 0.13686289
=1.3577

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)
=(795 / 8103) / (891 / 8126)
=0.38380847 / 0.40610386
=0.9451

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 - (6014 + 846) / 12199) / (1 - (4765 + 900) / 11714)
=0.43765882 / 0.51639064
=0.8475

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
=8126 / 8103
=1.0028

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))
=(416 / (416 + 900)) / (398 / (398 + 846))
=0.31610942 / 0.31993569
=0.988

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)
=(870 / 8126) / (1003 / 8103)
=0.10706375 / 0.12378132
=0.8649

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)
=((1946 + 2477) / 12199) / ((1946 + 1965) / 11714)
=0.3625707 / 0.333874
=1.086

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
=(475 - -7 - 979) / 12199
=-0.0407

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 -2.44 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

Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14
DSRI 0.83960.99511.02731.0290.87010.95681.00941.4571.35771.0781
GMI 0.99581.01711.08921.09081.04281.02420.99570.95420.94510.9395
AQI 1.65981.82782.32612.64211.08291.02280.97820.9160.84750.8666
SGI 0.96460.88540.82460.82910.80880.7770.77450.86121.00281.1289
DEPI 1.0450.87340.78140.69830.7460.83110.92440.97360.9881.0239
SGAI 1.08411.26481.39551.43881.26031.18861.11840.97340.86490.8116
LVGI 1.1811.15020.88231.01731.02221.06691.07991.04741.0861.0353
TATA -0.0474-0.0534-0.0793-0.1425-0.1403-0.1441-0.1225-0.0301-0.0407-0.0254
M-score -2.69-2.60-2.45-2.68-3.45-3.44-3.31-2.40-2.44-2.47
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