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A O Smith Corp (NYSE:AOS)
Beneish M-Score
-2.42 (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 -2.42 suggests that the company is not a manipulator.

AOS' s 10-Year Beneish M-Score Range
Min: -4.5   Max: 2.01
Current: -2.42

-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 * 1.0456+0.528 * 0.9517+0.404 * 0.9098+0.892 * 1.106+0.115 * 1.028
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0213+4.679 * -0.0027-0.327 * 1.0091
=-2.42

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

This Year (Jun15) TTM:Last Year (Jun14) TTM:
Accounts Receivable was $529 Mil.
Revenue was 653.5 + 618.5 + 626.8 + 581.6 = $2,480 Mil.
Gross Profit was 263.3 + 229.2 + 231.9 + 215.3 = $940 Mil.
Total Current Assets was $1,400 Mil.
Total Assets was $2,590 Mil.
Property, Plant and Equipment(Net PPE) was $433 Mil.
Depreciation, Depletion and Amortization(DDA) was $62 Mil.
Selling, General & Admin. Expense(SGA) was $611 Mil.
Total Current Liabilities was $579 Mil.
Long-Term Debt was $266 Mil.
Net Income was 71.1 + 58.4 + 53.2 + 50.6 = $233 Mil.
Non Operating Income was 2.7 + 2.7 + 1.7 + 1 = $8 Mil.
Cash Flow from Operations was 61.6 + -3.4 + 100.1 + 74 = $232 Mil.
Accounts Receivable was $457 Mil.
Revenue was 595.4 + 552.2 + 558.9 + 536.2 = $2,243 Mil.
Gross Profit was 216.2 + 195.9 + 199.9 + 196.6 = $809 Mil.
Total Current Assets was $1,234 Mil.
Total Assets was $2,431 Mil.
Property, Plant and Equipment(Net PPE) was $417 Mil.
Depreciation, Depletion and Amortization(DDA) was $61 Mil.
Selling, General & Admin. Expense(SGA) was $541 Mil.
Total Current Liabilities was $550 Mil.
Long-Term Debt was $236 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)
=(528.5 / 2480.4) / (457 / 2242.7)
=0.21307047 / 0.20377224
=1.0456

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)
=(229.2 / 2242.7) / (263.3 / 2480.4)
=0.36054755 / 0.37885019
=0.9517

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 - (1400 + 433.4) / 2589.8) / (1 - (1233.9 + 416.5) / 2430.7)
=0.29206889 / 0.32101864
=0.9098

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
=2480.4 / 2242.7
=1.106

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))
=(61.3 / (61.3 + 416.5)) / (61.8 / (61.8 + 433.4))
=0.12829636 / 0.12479806
=1.028

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)
=(611.3 / 2480.4) / (541.2 / 2242.7)
=0.24645219 / 0.24131627
=1.0213

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)
=((266.2 + 579.1) / 2589.8) / ((236.2 + 550) / 2430.7)
=0.32639586 / 0.32344592
=1.0091

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
=(233.3 - 8.1 - 232.3) / 2589.8
=-0.0027

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 -2.42 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

Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15
DSRI 0.8350.99381.05390.97090.96950.98621.00750.94750.98691.0456
GMI 0.8810.90060.9170.93580.95730.9760.99120.9850.97660.9517
AQI 0.98250.95890.94740.92510.91170.90310.89660.91970.9020.9098
SGI 1.12411.11121.12081.11061.10911.09661.07971.09391.10291.106
DEPI 0.97411.00171.06771.03041.05561.0671.02781.07911.05771.028
SGAI 1.06441.06421.05381.04831.03771.01161.00410.99710.99651.0213
LVGI 0.84990.90930.98421.00131.03781.07471.04471.00861.05411.0091
TATA -0.0193-0.042-0.0416-0.0437-0.0317-0.0293-0.0238-0.0244-0.014-0.0027
M-score -2.65-2.63-2.58-2.68-2.63-2.61-2.57-2.59-2.53-2.42
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