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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 -0.41. The lowest was -4.41. And the median was -2.86.
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 * 1.1916||+||0.528 * 0.964||+||0.404 * 1.0384||+||0.892 * 0.8836||+||0.115 * 1.0768|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.989||+||4.679 * -0.0804||-||0.327 * 0.918|
|This Year (Dec15) TTM:||Last Year (Dec14) TTM:|
|Accounts Receivable was $48.8 Mil.|
Revenue was 202.442 + 203.178 + 214.231 + 229.975 = $849.8 Mil.
Gross Profit was 110.524 + 109.904 + 112.366 + 126.422 = $459.2 Mil.
Total Current Assets was $243.1 Mil.
Total Assets was $664.0 Mil.
Property, Plant and Equipment(Net PPE) was $142.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $22.0 Mil.
Selling, General & Admin. Expense(SGA) was $369.8 Mil.
Total Current Liabilities was $330.1 Mil.
Long-Term Debt was $122.4 Mil.
Net Income was 10.447 + 1.688 + 0.716 + 10.447 = $23.3 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.0 Mil.
Cash Flow from Operations was 23.391 + 21.292 + -1.506 + 33.533 = $76.7 Mil.
|Accounts Receivable was $46.4 Mil.
Revenue was 243.203 + 242.561 + 238.096 + 237.923 = $961.8 Mil.
Gross Profit was 136.351 + 125.022 + 121.82 + 117.808 = $501.0 Mil.
Total Current Assets was $291.4 Mil.
Total Assets was $752.8 Mil.
Property, Plant and Equipment(Net PPE) was $157.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $26.5 Mil.
Selling, General & Admin. Expense(SGA) was $423.1 Mil.
Total Current Liabilities was $322.7 Mil.
Long-Term Debt was $236.1 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)|
|=||(48.837 / 849.826)||/||(46.383 / 961.783)|
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)|
|=||(109.904 / 961.783)||/||(110.524 / 849.826)|
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 - (243.098 + 142.164) / 664.014)||/||(1 - (291.414 + 157.072) / 752.838)|
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))|
|=||(26.456 / (26.456 + 157.072))||/||(21.973 / (21.973 + 142.164))|
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)|
|=||(369.769 / 849.826)||/||(423.143 / 961.783)|
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)|
|=||((122.429 + 330.107) / 664.014)||/||((236.147 + 322.733) / 752.838)|
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|
|=||(23.298 - 0||-||76.71)||/||664.014|
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 -2.75 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