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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 ITT Educational Services Inc was -0.21. The lowest was -4.46. And the median was -2.99.
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 * 0.7071||+||0.528 * 0.9786||+||0.404 * 1.5244||+||0.892 * 0.9274||+||0.115 * 0.9537|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8776||+||4.679 * -0.1273||-||0.327 * 1.0479|
|This Year (Jun15) TTM:||Last Year (Jun14) TTM:|
|Accounts Receivable was $45.2 Mil.|
Revenue was 214.231 + 229.975 + 243.203 + 242.561 = $930.0 Mil.
Gross Profit was 112.366 + 126.422 + 136.351 + 125.022 = $500.2 Mil.
Total Current Assets was $268.2 Mil.
Total Assets was $711.3 Mil.
Property, Plant and Equipment(Net PPE) was $150.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $25.5 Mil.
Selling, General & Admin. Expense(SGA) was $407.4 Mil.
Total Current Liabilities was $297.2 Mil.
Long-Term Debt was $199.9 Mil.
Net Income was 0.716 + 10.447 + 14.917 + 10.322 = $36.4 Mil.
Non Operating Income was 0 + 0 + 0 + 16.631 = $16.6 Mil.
Cash Flow from Operations was -1.506 + 33.533 + 45.174 + 33.122 = $110.3 Mil.
|Accounts Receivable was $68.9 Mil.
Revenue was 238.096 + 237.923 + 267.173 + 259.617 = $1,002.8 Mil.
Gross Profit was 121.82 + 117.808 + 148.741 + 139.413 = $527.8 Mil.
Total Current Assets was $407.6 Mil.
Total Assets was $776.2 Mil.
Property, Plant and Equipment(Net PPE) was $158.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $25.6 Mil.
Selling, General & Admin. Expense(SGA) was $500.6 Mil.
Total Current Liabilities was $459.3 Mil.
Long-Term Debt was $58.4 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)|
|=||(45.204 / 929.97)||/||(68.937 / 1002.809)|
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)|
|=||(126.422 / 1002.809)||/||(112.366 / 929.97)|
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 - (268.24 + 150.095) / 711.3)||/||(1 - (407.552 + 158.947) / 776.219)|
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))|
|=||(25.579 / (25.579 + 158.947))||/||(25.528 / (25.528 + 150.095))|
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)|
|=||(407.382 / 929.97)||/||(500.568 / 1002.809)|
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)|
|=||((199.925 + 297.231) / 711.3)||/||((58.442 + 459.278) / 776.219)|
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|
|=||(36.402 - 16.631||-||110.323)||/||711.3|
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 -3.21 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
ITT Educational Services Inc Annual Data
ITT Educational Services Inc Quarterly Data