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ITT Educational Services, Inc. (NYSE:ESI)
Beneish M-Score
-2.29 (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 -2.11 signals that the company is a manipulator.

ESI' s 10-Year Beneish M-Score Range
Min: -4.46   Max: -0.21
Current: -2.29

-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 -2.88.


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 * 1.4539+0.528 * 1.076+0.404 * 1.3322+0.892 * 0.8312+0.115 * 0.9616
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1514+4.679 * -0.0254-0.327 * 0.7587
=-2.11

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

This Year (Dec13) TTM:Last Year (Dec12) TTM:
Accounts Receivable was $93 Mil.
Revenue was 262.921 + 259.416 + 259.936 + 287.711 = $1,070 Mil.
Gross Profit was 141.81 + 137.422 + 136.108 + 162.49 = $578 Mil.
Total Current Assets was $374 Mil.
Total Assets was $672 Mil.
Property, Plant and Equipment(Net PPE) was $169 Mil.
Depreciation, Depletion and Amortization(DDA) was $27 Mil.
Selling, General & Admin. Expense(SGA) was $472 Mil.
Total Current Liabilities was $339 Mil.
Long-Term Debt was $0 Mil.
Net Income was -11.546 + 18.941 + 20.859 + 31.13 = $59 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 60.955 + 51.317 + 7.607 + -43.418 = $76 Mil.
Accounts Receivable was $77 Mil.
Revenue was 300.843 + 314.747 + 329.825 + 341.794 = $1,287 Mil.
Gross Profit was 171.449 + 180.799 + 188.885 + 206.853 = $748 Mil.
Total Current Assets was $385 Mil.
Total Assets was $672 Mil.
Property, Plant and Equipment(Net PPE) was $190 Mil.
Depreciation, Depletion and Amortization(DDA) was $29 Mil.
Selling, General & Admin. Expense(SGA) was $493 Mil.
Total Current Liabilities was $307 Mil.
Long-Term Debt was $140 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)
=(93.435 / 1069.984) / (77.313 / 1287.209)
=0.08732374 / 0.06006251
=1.4539

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)
=(137.422 / 1287.209) / (141.81 / 1069.984)
=0.58109134 / 0.54003611
=1.076

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 - (374.037 + 168.509) / 672.273) / (1 - (384.965 + 189.89) / 672.23)
=0.19296774 / 0.1448537
=1.3322

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
=1069.984 / 1287.209
=0.8312

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))
=(29.35 / (29.35 + 189.89)) / (27.252 / (27.252 + 168.509))
=0.13387156 / 0.13921057
=0.9616

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)
=(472.265 / 1069.984) / (493.447 / 1287.209)
=0.44137576 / 0.38334645
=1.1514

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 + 339.14) / 672.273) / ((140 + 306.949) / 672.23)
=0.50446768 / 0.66487512
=0.7587

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
=(59.384 - 0 - 76.461) / 672.273
=-0.0254

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 -2.11 signals that the company is likely to 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 0.93921.20440.6081.40791.68532.20790.66680.74281.87281.4539
GMI 0.89930.9880.98810.90040.94460.94390.99381.05041.08641.076
AQI 0.64081.06951.16591.26690.24972.81071.88461.05631.48121.3322
SGI 1.18171.11361.10141.14751.16771.29931.21020.93950.85820.8312
DEPI 1.32291.27120.96420.96621.11921.04110.94910.97860.90910.9616
SGAI 0.9950.99381.03411.0660.97490.95690.96651.05171.30741.1665
LVGI 0.84820.89721.82951.05350.83411.03461.06390.90550.97880.7587
TATA -0.0726-0.073-0.0817-0.04940.0469-0.0016-0.2733-0.10990.0522-0.0254
M-score -2.82-2.44-3.35-2.18-1.74-0.41-3.54-3.22-1.38-2.11

ITT Educational Services, Inc. Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 0.66670.74280.99551.76891.8131.87282.26252.01131.63431.4539
GMI 1.03981.05041.06081.07261.06431.08641.09161.0871.09481.076
AQI 1.60421.05631.21491.28341.24541.48121.17970.9551.09621.3322
SGI 0.98780.93950.9140.88540.87860.85820.84540.83060.81790.8312
DEPI 0.98070.97860.95920.94180.91050.90910.91560.92260.95120.9616
SGAI 1.03411.05171.09091.1041.1271.30741.33131.3391.32761.1514
LVGI 0.99030.90550.92680.91490.89050.97880.79570.81210.83270.7587
TATA -0.2301-0.10990.06110.1910.19010.05220.13360.0237-0.0667-0.0254
M-score -3.61-3.22-2.15-0.83-0.81-1.38-0.71-1.57-2.29-2.11
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