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A.O. Smith Corp (NYSE:AOS)
Beneish M-Score
-2.54 (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 -2.54 suggests that the company is not a manipulator.

AOS' s Beneish M-Score Range Over the Past 10 Years
Min: -4.5   Max: 1.97
Current: -2.54

-4.5
1.97

During the past 13 years, the highest Beneish M-Score of A.O. Smith Corp was 1.97. The lowest was -4.50. And the median was -2.53.


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 * 1.0375+0.528 * 0.9331+0.404 * 1.0571+0.892 * 1.0409+0.115 * 1.015
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0003+4.679 * -0.0201-0.327 * 1.0676
=-2.54

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

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $517 Mil.
Revenue was 683.9 + 667 + 636.9 + 639.4 = $2,627 Mil.
Gross Profit was 283.3 + 283.7 + 262.7 + 262.6 = $1,092 Mil.
Total Current Assets was $1,508 Mil.
Total Assets was $2,824 Mil.
Property, Plant and Equipment(Net PPE) was $458 Mil.
Depreciation, Depletion and Amortization(DDA) was $64 Mil.
Selling, General & Admin. Expense(SGA) was $639 Mil.
Total Current Liabilities was $682 Mil.
Long-Term Debt was $329 Mil.
Net Income was 83.2 + 87.1 + 73.5 + 79.8 = $324 Mil.
Non Operating Income was 1.9 + 2.3 + 2 + 3.2 = $9 Mil.
Cash Flow from Operations was 108.5 + 128.6 + 26.5 + 107.3 = $371 Mil.
Accounts Receivable was $479 Mil.
Revenue was 625.1 + 653.5 + 618.5 + 626.8 = $2,524 Mil.
Gross Profit was 255.6 + 262.4 + 229.2 + 231.9 = $979 Mil.
Total Current Assets was $1,414 Mil.
Total Assets was $2,600 Mil.
Property, Plant and Equipment(Net PPE) was $439 Mil.
Depreciation, Depletion and Amortization(DDA) was $63 Mil.
Selling, General & Admin. Expense(SGA) was $614 Mil.
Total Current Liabilities was $624 Mil.
Long-Term Debt was $248 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)
=(517.3 / 2627.2) / (479 / 2523.9)
=0.19690164 / 0.18978565
=1.0375

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)
=(979.1 / 2523.9) / (1092.3 / 2627.2)
=0.38793138 / 0.41576583
=0.9331

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 - (1507.6 + 458.4) / 2824.4) / (1 - (1413.8 + 438.8) / 2600.2)
=0.30392296 / 0.28751634
=1.0571

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
=2627.2 / 2523.9
=1.0409

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))
=(62.7 / (62.7 + 438.8)) / (64.4 / (64.4 + 458.4))
=0.12502493 / 0.12318286
=1.015

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)
=(639.2 / 2627.2) / (613.9 / 2523.9)
=0.24330085 / 0.24323468
=1.0003

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)
=((328.9 + 682.1) / 2824.4) / ((247.7 + 624.1) / 2600.2)
=0.35795213 / 0.3352819
=1.0676

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
=(323.6 - 9.4 - 370.9) / 2824.4
=-0.0201

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 -2.54 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.

A.O. Smith Corp Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 1.06161.02460.87841.27091.04951.02381.01850.97090.94750.9796
GMI 0.97090.96661.02870.75150.9590.99930.89140.93580.9850.9162
AQI 1.27451.01191.0111.37530.90840.77461.02270.92510.91970.9598
SGI 1.27951.06980.99690.59661.08311.14851.13381.11061.09391.0766
DEPI 1.03290.90311.0111.0250.97761.05120.95111.03041.07910.9846
SGAI 1.00571.04730.98761.36861.1520.89151.06591.04830.99710.9915
LVGI 1.29960.97260.94980.83941.0071.10230.78921.00131.00861.0435
TATA -0.0349-0.07-0.0225-0.0906-0.0060.092-0.0117-0.0429-0.0244-0.0275
M-score -2.34-2.75-2.66-3.00-2.48-2.00-2.39-2.68-2.59-2.63

A.O. Smith Corp Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
DSRI 0.98621.00750.94750.98691.04560.91560.97960.96910.90251.0375
GMI 0.9760.99120.9850.97660.95260.9320.91620.90240.91310.9331
AQI 0.90310.89660.91970.9020.90980.92740.95980.98760.98851.0571
SGI 1.09661.07971.09391.10291.1061.10311.07661.05471.03551.0409
DEPI 1.0671.02781.07911.05771.0281.02530.98460.99791.01251.015
SGAI 1.01161.00410.99710.99651.01981.00640.99151.00370.98651.0003
LVGI 1.07471.04471.00861.05411.00911.0071.04350.99621.02061.0676
TATA -0.0293-0.0238-0.0244-0.0151-0.0039-0.0347-0.0275-0.0315-0.0501-0.0201
M-score -2.61-2.57-2.59-2.53-2.43-2.69-2.63-2.66-2.83-2.54
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