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A O Smith Corp (NYSE:AOS)
Beneish M-Score
-2.59 (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.

A O Smith Corp has a M-score of -2.59 suggests that the company is not a manipulator.

AOS' s 10-Year Beneish M-Score Range
Min: -3.04   Max: -1.33
Current: -2.59

-3.04
-1.33

During the past 13 years, the highest Beneish M-Score of A O Smith Corp was -1.33. The lowest was -3.04. And the median was -2.47.


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 A O Smith Corp 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 * 0.9475+0.528 * 0.985+0.404 * 0.9197+0.892 * 1.0939+0.115 * 1.0791
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9971+4.679 * -0.0244-0.327 * 1.0086
=-2.59

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

This Year (Dec14) TTM:Last Year (Dec13) TTM:
Accounts Receivable was $475 Mil.
Revenue was 626.8 + 581.6 + 595.4 + 552.2 = $2,356 Mil.
Gross Profit was 231.9 + 215.3 + 216.2 + 195.9 = $859 Mil.
Total Current Assets was $1,319 Mil.
Total Assets was $2,515 Mil.
Property, Plant and Equipment(Net PPE) was $428 Mil.
Depreciation, Depletion and Amortization(DDA) was $60 Mil.
Selling, General & Admin. Expense(SGA) was $572 Mil.
Total Current Liabilities was $605 Mil.
Long-Term Debt was $210 Mil.
Net Income was 53.2 + 50.6 + 57.3 + 46.7 = $208 Mil.
Non Operating Income was 1.7 + 1 + 1.2 + 1.3 = $5 Mil.
Cash Flow from Operations was 100.1 + 74 + 78 + 11.8 = $264 Mil.
Accounts Receivable was $459 Mil.
Revenue was 558.9 + 536.2 + 549.1 + 509.6 = $2,154 Mil.
Gross Profit was 199.9 + 196.6 + 198 + 179.3 = $774 Mil.
Total Current Assets was $1,206 Mil.
Total Assets was $2,392 Mil.
Property, Plant and Equipment(Net PPE) was $391 Mil.
Depreciation, Depletion and Amortization(DDA) was $60 Mil.
Selling, General & Admin. Expense(SGA) was $525 Mil.
Total Current Liabilities was $591 Mil.
Long-Term Debt was $178 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)
=(475.4 / 2356) / (458.7 / 2153.8)
=0.20178268 / 0.21297242
=0.9475

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)
=(215.3 / 2153.8) / (231.9 / 2356)
=0.35927198 / 0.36472835
=0.985

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 - (1319 + 427.7) / 2515.3) / (1 - (1205.6 + 391.3) / 2391.5)
=0.30556991 / 0.33226009
=0.9197

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
=2356 / 2153.8
=1.0939

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))
=(59.7 / (59.7 + 391.3)) / (59.8 / (59.8 + 427.7))
=0.13237251 / 0.12266667
=1.0791

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)
=(572.1 / 2356) / (524.5 / 2153.8)
=0.24282683 / 0.24352308
=0.9971

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)
=((210.1 + 605.2) / 2515.3) / ((177.7 + 590.9) / 2391.5)
=0.32413629 / 0.32138825
=1.0086

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
=(207.8 - 5.2 - 263.9) / 2515.3
=-0.0244

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.

A O Smith Corp has a M-score of -2.59 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.

A O Smith Corp Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 0.96891.06161.02460.87841.27091.04951.02381.01850.97090.9475
GMI 0.86510.97090.96661.02870.75150.9590.99930.89140.93580.985
AQI 0.99111.27451.01191.0111.37530.90840.77461.02270.92510.9197
SGI 1.02181.27951.06980.99690.59661.08311.14851.13381.11061.0939
DEPI 1.01341.03290.90311.0111.0250.97761.05120.95111.03041.0791
SGAI 1.0451.00571.04730.98761.36861.1520.89151.06591.04830.9971
LVGI 0.92071.29960.97260.94980.83941.0071.10230.78921.00131.0086
TATA -0.107-0.0349-0.0547-0.014-0.0906-0.0060.0967-0.0117-0.0429-0.0244
M-score -3.04-2.34-2.67-2.62-3.00-2.48-1.97-2.39-2.68-2.59

A O Smith Corp Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
DSRI 0.84791.01850.8350.99381.05390.97090.96950.98621.00750.9475
GMI 0.89850.89140.8810.90060.9170.93580.95730.9760.99120.985
AQI 1.04651.02270.98250.95890.94740.92510.91170.90310.89660.9197
SGI 1.17811.13381.12411.11121.12081.11061.10911.09661.07971.0939
DEPI 0.89920.95110.97411.00171.06771.03041.05561.0671.02781.0791
SGAI 1.03621.06591.06441.06421.05381.04831.03771.01161.00410.9971
LVGI 0.76680.78920.84990.90930.98421.00131.03781.07471.04471.0086
TATA -0.0325-0.0116-0.0193-0.042-0.0416-0.0437-0.0317-0.0293-0.0238-0.0244
M-score -2.59-2.39-2.65-2.63-2.58-2.68-2.63-2.61-2.57-2.59
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