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ITT Educational Services, Inc. (NYSE:ESI)
Beneish M-Score
-4.02 (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.

ITT Educational Services, Inc. has a M-score of -4.02 suggests that the company is not a manipulator.

ESI' s 10-Year Beneish M-Score Range
Min: -4.46   Max: -0.21
Current: -4.02

-4.46
-0.21

During the past 13 years, the highest Beneish M-Score of ITT Educational Services, Inc. was -0.21. The lowest was -4.46. And the median was -2.93.


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 ITT Educational Services, 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 * 0.6359+0.528 * 1.0578+0.404 * 1.161+0.892 * 0.8609+0.115 * 1.0017
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1788+4.679 * -0.2541-0.327 * 0.8609
=-4.02

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

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $69 Mil.
Revenue was 238.096 + 237.923 + 267.173 + 259.617 = $1,003 Mil.
Gross Profit was 121.82 + 117.808 + 169.442 + 123.031 = $532 Mil.
Total Current Assets was $408 Mil.
Total Assets was $776 Mil.
Property, Plant and Equipment(Net PPE) was $159 Mil.
Depreciation, Depletion and Amortization(DDA) was $26 Mil.
Selling, General & Admin. Expense(SGA) was $501 Mil.
Total Current Liabilities was $459 Mil.
Long-Term Debt was $58 Mil.
Net Income was 0.392 + 3.622 + -39.381 + 9.424 = $-26 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 21.563 + 36.918 + 61.422 + 51.416 = $171 Mil.
Accounts Receivable was $126 Mil.
Revenue was 260.459 + 285.062 + 305.572 + 313.791 = $1,165 Mil.
Gross Profit was 136.918 + 160.886 + 176.178 + 179.843 = $654 Mil.
Total Current Assets was $410 Mil.
Total Assets was $768 Mil.
Property, Plant and Equipment(Net PPE) was $179 Mil.
Depreciation, Depletion and Amortization(DDA) was $29 Mil.
Selling, General & Admin. Expense(SGA) was $493 Mil.
Total Current Liabilities was $350 Mil.
Long-Term Debt was $245 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)
=(68.937 / 1002.809) / (125.927 / 1164.884)
=0.0687439 / 0.10810261
=0.6359

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)
=(117.808 / 1164.884) / (121.82 / 1002.809)
=0.56127906 / 0.53061052
=1.0578

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 - (407.552 + 158.947) / 776.219) / (1 - (409.851 + 179.095) / 767.578)
=0.27018148 / 0.23272163
=1.161

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
=1002.809 / 1164.884
=0.8609

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))
=(28.878 / (28.878 + 179.095)) / (25.579 / (25.579 + 158.947))
=0.13885456 / 0.13862003
=1.0017

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)
=(500.568 / 1002.809) / (493.279 / 1164.884)
=0.49916584 / 0.42345761
=1.1788

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)
=((58.442 + 459.278) / 776.219) / ((244.983 + 349.701) / 767.578)
=0.66697672 / 0.77475384
=0.8609

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
=(-25.943 - 0 - 171.319) / 776.219
=-0.2541

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.

ITT Educational Services, Inc. has a M-score of -4.02 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.

ITT Educational Services, Inc. Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.93921.20440.6081.40791.68532.20790.66680.74281.91271.5131
GMI 0.89930.9880.98810.90040.94460.94390.99381.05041.08541.0643
AQI 0.64081.06951.16591.26690.24972.81071.88461.05631.49531.7267
SGI 1.18171.11361.10141.14751.16771.29931.21020.93950.85780.8334
DEPI 1.32291.27120.96420.96621.11921.04110.94910.97860.90910.9616
SGAI 0.9950.99381.03411.0660.97490.95690.96651.05171.33261.1824
LVGI 0.84820.89721.82951.05350.83411.03461.06390.90551.01830.9768
TATA -0.0726-0.073-0.0817-0.04940.0469-0.0016-0.2733-0.10990.0464-0.039
M-score -2.82-2.44-3.35-2.18-1.74-0.41-3.54-3.22-1.38-2.04

ITT Educational Services, Inc. Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 1.01681.80741.8511.91272.26382.01111.6391.51310.87510.6359
GMI 1.06191.07371.0661.08541.08791.08251.11511.05651.07151.0578
AQI 1.21911.28831.25341.49531.82931.51151.4651.72671.19331.161
SGI 0.91240.88270.87520.85780.84650.83430.82320.83340.83180.8609
DEPI 0.95920.94180.91050.90910.91560.92260.95120.96160.98751.0017
SGAI 1.08821.10061.12371.33261.35821.36021.35941.18241.17321.1788
LVGI 0.94280.94290.93241.01831.05031.05191.12790.97680.82690.8609
TATA 0.06230.1910.18720.04640.13610.0446-0.0396-0.039-0.2116-0.2541
M-score -2.13-0.80-0.80-1.38-0.52-1.33-2.10-2.04-3.59-4.02
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