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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 Digirad Corp was 1.32. The lowest was -3.30. And the median was -2.94.
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 Digirad 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 * 0.9666||+||0.528 * 1.0327||+||0.404 * 1.1038||+||0.892 * 2.0628||+||0.115 * 1.1726|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9954||+||4.679 * 0.0313||-||0.327 * 2.685|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $14.5 Mil.|
Revenue was 31.134 + 31.086 + 32.09 + 31.157 = $125.5 Mil.
Gross Profit was 8.642 + 8.301 + 9.765 + 9.065 = $35.8 Mil.
Total Current Assets was $27.1 Mil.
Total Assets was $106.3 Mil.
Property, Plant and Equipment(Net PPE) was $31.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $9.9 Mil.
Selling, General & Admin. Expense(SGA) was $30.0 Mil.
Total Current Liabilities was $22.7 Mil.
Long-Term Debt was $16.1 Mil.
Net Income was 1.978 + -0.283 + 0.998 + 11.609 = $14.3 Mil.
Non Operating Income was 0.626 + -0.428 + -0.058 + 0 = $0.1 Mil.
Cash Flow from Operations was 4.018 + 3.017 + 3.063 + 0.736 = $10.8 Mil.
|Accounts Receivable was $7.3 Mil.
Revenue was 15.577 + 15.862 + 15.547 + 13.839 = $60.8 Mil.
Gross Profit was 4.692 + 4.802 + 4.767 + 3.648 = $17.9 Mil.
Total Current Assets was $31.7 Mil.
Total Assets was $64.1 Mil.
Property, Plant and Equipment(Net PPE) was $6.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $2.4 Mil.
Selling, General & Admin. Expense(SGA) was $14.6 Mil.
Total Current Liabilities was $8.7 Mil.
Long-Term Debt was $0.0 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)|
|=||(14.503 / 125.467)||/||(7.274 / 60.825)|
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)|
|=||(17.909 / 60.825)||/||(35.773 / 125.467)|
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 - (27.079 + 31.407) / 106.263)||/||(1 - (31.747 + 6.252) / 64.113)|
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))|
|=||(2.441 / (2.441 + 6.252))||/||(9.889 / (9.889 + 31.407))|
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)|
|=||(30.037 / 125.467)||/||(14.629 / 60.825)|
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)|
|=||((16.07 + 22.673) / 106.263)||/||((0 + 8.706) / 64.113)|
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|
|=||(14.302 - 0.14||-||10.834)||/||106.263|
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.
Digirad Corp has a M-score of -1.89 signals that the company is likely to 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
Digirad Corp Annual Data
Digirad Corp Quarterly Data