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A.O. Smith Corp (NYSE:AOS)
Beneish M-Score
-2.64 (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 -2.64 suggests that the company is not a manipulator.

AOS' s Beneish M-Score Range Over the Past 10 Years
Min: -3.04   Max: -1.33
Current: -2.64

-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 -2.53.


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 * 0.9796+0.528 * 0.9162+0.404 * 0.9256+0.892 * 1.0766+0.115 * 0.9846
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9915+4.679 * -0.0273-0.327 * 1.0367
=-2.64

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

This Year (Dec15) TTM:Last Year (Dec14) TTM:
Accounts Receivable was $501 Mil.
Revenue was 639.4 + 625.1 + 653.5 + 618.5 = $2,537 Mil.
Gross Profit was 260.6 + 256.7 + 263.3 + 229.2 = $1,010 Mil.
Total Current Assets was $1,455 Mil.
Total Assets was $2,647 Mil.
Property, Plant and Equipment(Net PPE) was $443 Mil.
Depreciation, Depletion and Amortization(DDA) was $63 Mil.
Selling, General & Admin. Expense(SGA) was $611 Mil.
Total Current Liabilities was $653 Mil.
Long-Term Debt was $236 Mil.
Net Income was 79.8 + 73.6 + 71.1 + 58.4 = $283 Mil.
Non Operating Income was 3.2 + 2.2 + 2.7 + 2.7 = $11 Mil.
Cash Flow from Operations was 113.1 + 173.1 + 61.6 + -3.4 = $344 Mil.
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.



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)
=(501.4 / 2536.5) / (475.4 / 2356)
=0.19767396 / 0.20178268
=0.9796

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)
=(256.7 / 2356) / (260.6 / 2536.5)
=0.36472835 / 0.39810763
=0.9162

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 - (1455.3 + 442.7) / 2646.5) / (1 - (1319 + 427.7) / 2515.3)
=0.28282637 / 0.30556991
=0.9256

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
=2536.5 / 2356
=1.0766

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))
=(59.8 / (59.8 + 427.7)) / (63 / (63 + 442.7))
=0.12266667 / 0.12457979
=0.9846

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)
=(610.7 / 2536.5) / (572.1 / 2356)
=0.24076483 / 0.24282683
=0.9915

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)
=((236.1 + 653.2) / 2646.5) / ((210.1 + 605.2) / 2515.3)
=0.33602872 / 0.32413629
=1.0367

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
=(282.9 - 10.8 - 344.4) / 2646.5
=-0.0273

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 -2.64 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

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 1.27451.01191.0111.37530.90840.77461.02270.92510.91970.9256
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 1.29960.97260.94980.83941.0071.10230.78921.00131.00861.0367
TATA -0.0349-0.07-0.0225-0.0906-0.0060.092-0.0117-0.0429-0.0244-0.0273
M-score -2.34-2.75-2.66-3.00-2.48-2.00-2.39-2.68-2.59-2.64

A.O. Smith Corp Quarterly Data

Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16
DSRI 0.97090.96950.98621.00750.94750.98691.04560.91560.97960.9691
GMI 0.93580.95730.9760.99120.9850.97660.95170.93010.91620.9024
AQI 0.92510.91170.90310.89660.91970.9020.90980.92740.92560.9876
SGI 1.11061.10911.09661.07971.09391.10291.1061.10311.07661.0547
DEPI 1.03041.05561.0671.02781.07911.05771.0281.02530.98460.9979
SGAI 1.04831.03771.01161.00410.99710.99651.02131.00970.99151.0037
LVGI 1.00131.03781.07471.04471.00861.05411.00911.0071.03670.9962
TATA -0.0437-0.0317-0.0293-0.0238-0.0244-0.014-0.0027-0.0325-0.0273-0.0326
M-score -2.68-2.63-2.61-2.57-2.59-2.53-2.42-2.69-2.64-2.67
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