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A.O. Smith Corporation (NYSE:AOS)
Beneish M-Score
-2.68 (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 Corporation has a M-score of -2.68 suggests that the company is not a manipulator.

AOS' s 10-Year Beneish M-Score Range
Min: -3.04   Max: -1.33
Current: -2.68

-3.04
-1.33

During the past 13 years, the highest Beneish M-Score of A.O. Smith Corporation was -1.33. The lowest was -3.04. And the median was -2.45.


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 Corporation 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 * 0.9709+0.528 * 0.9358+0.404 * 0.9251+0.892 * 1.1106+0.115 * 1.0304
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0483+4.679 * -0.0429-0.327 * 1.0013
=-2.68

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

This Year (Dec13) TTM:Last Year (Dec12) TTM:
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.
Net Income was 42.4 + 46.2 + 42.1 + 39 = $170 Mil.
Non Operating Income was -10 + 1.1 + 0.7 + 1 = $-7 Mil.
Cash Flow from Operations was 91.6 + 83 + 69.2 + 35.8 = $280 Mil.
Accounts Receivable was $425 Mil.
Revenue was 524.3 + 462.2 + 484.2 + 468.6 = $1,939 Mil.
Gross Profit was 185.6 + 156.8 + 160.5 + 149.1 = $652 Mil.
Total Current Assets was $1,115 Mil.
Total Assets was $2,279 Mil.
Property, Plant and Equipment(Net PPE) was $346 Mil.
Depreciation, Depletion and Amortization(DDA) was $55 Mil.
Selling, General & Admin. Expense(SGA) was $451 Mil.
Total Current Liabilities was $506 Mil.
Long-Term Debt was $225 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)
=(458.7 / 2153.8) / (425.4 / 1939.3)
=0.21297242 / 0.2193575
=0.9709

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)
=(196.6 / 1939.3) / (199.9 / 2153.8)
=0.33620378 / 0.35927198
=0.9358

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 - (1205.6 + 391.3) / 2391.5) / (1 - (1114.6 + 345.7) / 2278.8)
=0.33226009 / 0.35918027
=0.9251

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
=2153.8 / 1939.3
=1.1106

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))
=(54.6 / (54.6 + 345.7)) / (59.7 / (59.7 + 391.3))
=0.1363977 / 0.13237251
=1.0304

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)
=(524.5 / 2153.8) / (450.5 / 1939.3)
=0.24352308 / 0.23230031
=1.0483

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)
=((177.7 + 590.9) / 2391.5) / ((225.1 + 506.3) / 2278.8)
=0.32138825 / 0.3209584
=1.0013

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
=(169.7 - -7.2 - 279.6) / 2391.5
=-0.0429

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 Corporation has a M-score of -2.68 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 Corporation 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 Corporation Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 0.55171.02381.090.99630.84791.01850.8350.99381.05390.9709
GMI 1.21180.99930.99420.92920.89850.89140.8810.90060.9170.9358
AQI 0.95980.77460.84480.89721.04651.02270.98250.95890.94740.9251
SGI 1.58561.14851.1441.17211.17811.13381.12411.11121.12081.1106
DEPI 0.31961.05121.0161.01990.89920.95110.97411.00171.06771.0304
SGAI 0.73620.89150.9031.02481.03621.06591.06441.06421.05381.0483
LVGI 1.08171.10230.89780.79450.76680.78920.84990.90930.98421.0013
TATA 0.12740.10150.07330.0508-0.0325-0.0116-0.0204-0.0439-0.044-0.0429
M-score -1.74-1.95-1.94-2.11-2.59-2.39-2.65-2.64-2.59-2.68
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