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A O Smith Corp (NYSE:AOS)
Beneish M-Score
-2.57 (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 -2.57 suggests that the company is not a manipulator.

AOS' s 10-Year Beneish M-Score Range
Min: -4.5   Max: 2.01
Current: -2.57

-4.5
2.01

During the past 13 years, the highest Beneish M-Score of A O Smith Corp was 2.01. The lowest was -4.50. And the median was -2.48.


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 * 1.0075+0.528 * 0.9912+0.404 * 0.8966+0.892 * 1.0797+0.115 * 1.0278
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0041+4.679 * -0.0238-0.327 * 1.0447
=-2.57

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

This Year (Sep14) TTM:Last Year (Sep13) TTM:
Accounts Receivable was $474 Mil.
Revenue was 581.6 + 595.4 + 552.2 + 558.9 = $2,288 Mil.
Gross Profit was 215.3 + 216.2 + 195.9 + 199.9 = $827 Mil.
Total Current Assets was $1,295 Mil.
Total Assets was $2,487 Mil.
Property, Plant and Equipment(Net PPE) was $421 Mil.
Depreciation, Depletion and Amortization(DDA) was $62 Mil.
Selling, General & Admin. Expense(SGA) was $553 Mil.
Total Current Liabilities was $587 Mil.
Long-Term Debt was $241 Mil.
Net Income was 50.6 + 57.3 + 46.7 + 42.4 = $197 Mil.
Non Operating Income was 1 + 1.2 + 1.3 + -2.8 = $1 Mil.
Cash Flow from Operations was 74 + 78 + 11.8 + 91.6 = $255 Mil.
Accounts Receivable was $436 Mil.
Revenue was 536.2 + 549.1 + 509.6 + 524.3 = $2,119 Mil.
Gross Profit was 196.6 + 198 + 179.3 + 185.6 = $760 Mil.
Total Current Assets was $1,165 Mil.
Total Assets was $2,349 Mil.
Property, Plant and Equipment(Net PPE) was $372 Mil.
Depreciation, Depletion and Amortization(DDA) was $56 Mil.
Selling, General & Admin. Expense(SGA) was $510 Mil.
Total Current Liabilities was $535 Mil.
Long-Term Debt was $213 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)
=(474.3 / 2288.1) / (436 / 2119.2)
=0.20728989 / 0.20573801
=1.0075

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)
=(216.2 / 2119.2) / (215.3 / 2288.1)
=0.35838996 / 0.36156637
=0.9912

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 - (1294.8 + 421) / 2486.8) / (1 - (1165 + 371.7) / 2348.9)
=0.310037 / 0.34577888
=0.8966

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
=2288.1 / 2119.2
=1.0797

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))
=(56.4 / (56.4 + 371.7)) / (61.9 / (61.9 + 421))
=0.13174492 / 0.12818389
=1.0278

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)
=(553 / 2288.1) / (510.1 / 2119.2)
=0.24168524 / 0.24070404
=1.0041

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)
=((240.7 + 587.3) / 2486.8) / ((213.4 + 535.2) / 2348.9)
=0.33295802 / 0.31870237
=1.0447

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
=(197 - 0.7 - 255.4) / 2486.8
=-0.0238

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 -2.57 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

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 1.10160.96891.06161.02460.87841.27091.04951.02381.01850.9709
GMI 1.08250.86510.97090.96661.02870.75150.9590.99930.89140.9358
AQI 0.96230.99111.27451.01191.0111.37530.90840.77461.02270.9251
SGI 1.081.02181.27951.06980.99690.59661.08311.14851.13381.1106
DEPI 0.97111.01341.03290.90311.0111.0250.97761.05120.95111.0304
SGAI 1.05891.0451.00571.04730.98761.36861.1520.89151.06591.0483
LVGI 0.99360.92071.29960.97260.94980.83941.0071.10230.78921.0013
TATA -0.0228-0.107-0.0349-0.0547-0.014-0.0906-0.0060.0967-0.0117-0.0429
M-score -2.40-3.04-2.34-2.67-2.62-3.00-2.48-1.97-2.39-2.68

A O Smith Corp Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 0.99630.84791.01850.8350.99381.05390.97090.96950.98621.0075
GMI 0.92920.89850.89140.8810.90060.9170.93580.95730.9760.9912
AQI 0.89721.04651.02270.98250.95890.94740.92510.91170.90310.8966
SGI 1.17211.17811.13381.12411.11121.12081.11061.10911.09661.0797
DEPI 1.01990.89920.95110.97411.00171.06771.03041.05561.0671.0278
SGAI 1.02481.03621.06591.06441.06421.05381.04831.03771.01161.0041
LVGI 0.79450.76680.78920.84990.90930.98421.00131.03781.07471.0447
TATA 0.0508-0.0325-0.0116-0.0193-0.042-0.0416-0.0437-0.0317-0.0293-0.0238
M-score -2.11-2.59-2.39-2.65-2.63-2.58-2.68-2.63-2.61-2.57
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