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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 3.30. The lowest was -3.69. And the median was -2.93.
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 * 0.8864||+||0.528 * 1.0177||+||0.404 * 1.2364||+||0.892 * 1.8506||+||0.115 * 1.2359|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0817||+||4.679 * 0.0553||-||0.327 * 2.5407|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $13.6 Mil.|
Revenue was 31.086 + 32.09 + 31.157 + 15.577 = $109.9 Mil.
Gross Profit was 8.301 + 9.765 + 9.065 + 4.692 = $31.8 Mil.
Total Current Assets was $27.1 Mil.
Total Assets was $107.1 Mil.
Property, Plant and Equipment(Net PPE) was $31.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $8.0 Mil.
Selling, General & Admin. Expense(SGA) was $27.8 Mil.
Total Current Liabilities was $23.8 Mil.
Long-Term Debt was $17.3 Mil.
Net Income was -0.283 + 0.998 + 11.609 + 0.678 = $13.0 Mil.
Non Operating Income was -0.428 + -0.058 + 0 + 0 = $-0.5 Mil.
Cash Flow from Operations was 3.017 + 3.063 + 0.736 + 0.755 = $7.6 Mil.
|Accounts Receivable was $8.3 Mil.
Revenue was 15.862 + 15.547 + 13.839 + 14.143 = $59.4 Mil.
Gross Profit was 4.802 + 4.767 + 3.648 + 4.284 = $17.5 Mil.
Total Current Assets was $34.7 Mil.
Total Assets was $65.6 Mil.
Property, Plant and Equipment(Net PPE) was $6.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $2.2 Mil.
Selling, General & Admin. Expense(SGA) was $13.9 Mil.
Total Current Liabilities was $9.9 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)|
|=||(13.637 / 109.91)||/||(8.313 / 59.391)|
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)|
|=||(17.501 / 59.391)||/||(31.823 / 109.91)|
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 - (27.094 + 31.119) / 107.086)||/||(1 - (34.745 + 6.614) / 65.558)|
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))|
|=||(2.245 / (2.245 + 6.614))||/||(8.027 / (8.027 + 31.119))|
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)|
|=||(27.848 / 109.91)||/||(13.911 / 59.391)|
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)|
|=||((17.34 + 23.763) / 107.086)||/||((0 + 9.904) / 65.558)|
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|
|=||(13.002 - -0.486||-||7.571)||/||107.086|
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 -1.95 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