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Beneish M-Score -0.36 higher than -2.22, which implies that it might have manipulated its financial results.
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 -2.95.
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 * 0.9793||+||0.528 * 0.9554||+||0.404 * 6.5788||+||0.892 * 1.1262||+||0.115 * 1.0921|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9266||+||4.679 * -0.0431||-||0.327 * 1.0759|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $5.99 Mil.|
Revenue was 14.143 + 13.881 + 14.587 + 12.997 = $55.61 Mil.
Gross Profit was 4.284 + 4.409 + 4.505 + 3.442 = $16.64 Mil.
Total Current Assets was $32.95 Mil.
Total Assets was $41.90 Mil.
Property, Plant and Equipment(Net PPE) was $4.77 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.94 Mil.
Selling, General & Admin. Expense(SGA) was $13.07 Mil.
Total Current Liabilities was $8.29 Mil.
Long-Term Debt was $0.00 Mil.
Net Income was 0.772 + 1.028 + 0.823 + -0.148 = $2.48 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.00 Mil.
Cash Flow from Operations was 1.301 + 1.88 + 2.888 + -1.789 = $4.28 Mil.
|Accounts Receivable was $5.43 Mil.
Revenue was 12.527 + 12.413 + 12.89 + 11.546 = $49.38 Mil.
Gross Profit was 3.688 + 3.818 + 3.793 + 2.817 = $14.12 Mil.
Total Current Assets was $36.67 Mil.
Total Assets was $41.45 Mil.
Property, Plant and Equipment(Net PPE) was $4.15 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.91 Mil.
Selling, General & Admin. Expense(SGA) was $12.53 Mil.
Total Current Liabilities was $7.63 Mil.
Long-Term Debt was $0.00 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)|
|=||(5.989 / 55.608)||/||(5.43 / 49.376)|
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)|
|=||(4.409 / 49.376)||/||(4.284 / 55.608)|
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 - (32.952 + 4.766) / 41.901)||/||(1 - (36.669 + 4.153) / 41.451)|
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))|
|=||(1.913 / (1.913 + 4.153))||/||(1.935 / (1.935 + 4.766))|
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)|
|=||(13.074 / 55.608)||/||(12.529 / 49.376)|
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)|
|=||((0 + 8.293) / 41.901)||/||((0 + 7.625) / 41.451)|
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|
|=||(2.475 - 0||-||4.28)||/||41.901|
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 -0.36 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