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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.
During the past 13 years, the highest Beneish M-Score of Diamond Foods Inc was -0.89. The lowest was -3.47. And the median was -2.53.
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 Diamond Foods Inc 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 * 0.996||+||0.528 * 0.9123||+||0.404 * 0.9539||+||0.892 * 0.9988||+||0.115 * 1.1087|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.7787||+||4.679 * -0.0124||-||0.327 * 0.9824|
|This Year (Jul15) TTM:||Last Year (Jul14) TTM:|
|Accounts Receivable was $95.0 Mil.|
Revenue was 201.81 + 186.067 + 229.667 + 246.621 = $864.2 Mil.
Gross Profit was 54.489 + 52.957 + 61.158 + 59.39 = $228.0 Mil.
Total Current Assets was $283.2 Mil.
Total Assets was $1,212.7 Mil.
Property, Plant and Equipment(Net PPE) was $137.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $28.9 Mil.
Selling, General & Admin. Expense(SGA) was $151.4 Mil.
Total Current Liabilities was $136.8 Mil.
Long-Term Debt was $633.1 Mil.
Net Income was 7.869 + 6.29 + 11.177 + 7.694 = $33.0 Mil.
Non Operating Income was 4.411 + -1.428 + -1.49 + -1.452 = $0.0 Mil.
Cash Flow from Operations was -15.506 + -5.459 + 54.419 + 14.584 = $48.0 Mil.
|Accounts Receivable was $95.5 Mil.
Revenue was 219.07 + 190.892 + 220.577 + 234.668 = $865.2 Mil.
Gross Profit was 49.289 + 45.096 + 55.928 + 57.933 = $208.2 Mil.
Total Current Assets was $243.9 Mil.
Total Assets was $1,192.8 Mil.
Property, Plant and Equipment(Net PPE) was $131.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $31.5 Mil.
Selling, General & Admin. Expense(SGA) was $194.7 Mil.
Total Current Liabilities was $133.5 Mil.
Long-Term Debt was $637.3 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(95.005 / 864.165)||/||(95.505 / 865.207)|
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.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(52.957 / 865.207)||/||(54.489 / 864.165)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (283.229 + 137.065) / 1212.692)||/||(1 - (243.871 + 131.891) / 1192.834)|
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.
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))|
|=||(31.506 / (31.506 + 131.891))||/||(28.857 / (28.857 + 137.065))|
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)|
|=||(151.387 / 864.165)||/||(194.651 / 865.207)|
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)|
|=||((633.134 + 136.751) / 1212.692)||/||((637.327 + 133.549) / 1192.834)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(33.03 - 0.041||-||48.038)||/||1212.692|
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.
Diamond Foods Inc has a M-score of -2.55 suggests that the company will not be a manipulator.
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
Diamond Foods Inc Annual Data
Diamond Foods Inc Quarterly Data