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ITT Educational Services, Inc. (NYSE:ESI)
Beneish M-Score
-3.99 (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 -3.99 suggests that the company is not a manipulator.

ESI' s 10-Year Beneish M-Score Range
Min: -4.46   Max: -0.21
Current: -3.99

-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 -2.96.


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 * 0.6299+0.528 * 1.0604+0.404 * 1.3039+0.892 * 0.8875+0.115 * 1.0043
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1836+4.679 * -0.2537-0.327 * 1.0041
=-3.99

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

This Year (Sep14) TTM:Last Year (Sep13) TTM:
Accounts Receivable was $69 Mil.
Revenue was 242.561 + 238.096 + 237.923 + 267.173 = $986 Mil.
Gross Profit was 125.022 + 121.82 + 117.808 + 148.741 = $513 Mil.
Total Current Assets was $389 Mil.
Total Assets was $768 Mil.
Property, Plant and Equipment(Net PPE) was $155 Mil.
Depreciation, Depletion and Amortization(DDA) was $25 Mil.
Selling, General & Admin. Expense(SGA) was $511 Mil.
Total Current Liabilities was $438 Mil.
Long-Term Debt was $146 Mil.
Net Income was 10.322 + 0.392 + 3.622 + -39.381 = $-25 Mil.
Non Operating Income was 16.631 + 0 + 0 + 0 = $17 Mil.
Cash Flow from Operations was 33.122 + 21.563 + 36.918 + 61.422 = $153 Mil.
Accounts Receivable was $123 Mil.
Revenue was 259.617 + 260.459 + 285.062 + 305.572 = $1,111 Mil.
Gross Profit was 139.413 + 136.918 + 160.886 + 176.178 = $613 Mil.
Total Current Assets was $400 Mil.
Total Assets was $739 Mil.
Property, Plant and Equipment(Net PPE) was $174 Mil.
Depreciation, Depletion and Amortization(DDA) was $28 Mil.
Selling, General & Admin. Expense(SGA) was $487 Mil.
Total Current Liabilities was $405 Mil.
Long-Term Debt was $154 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)
=(68.587 / 985.753) / (122.693 / 1110.71)
=0.06957828 / 0.11046358
=0.6299

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)
=(121.82 / 1110.71) / (125.022 / 985.753)
=0.55225486 / 0.52081099
=1.0604

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 - (388.658 + 155.459) / 767.506) / (1 - (399.875 + 174.394) / 739.302)
=0.29105831 / 0.22322813
=1.3039

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
=985.753 / 1110.71
=0.8875

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))
=(28.121 / (28.121 + 174.394)) / (24.943 / (24.943 + 155.459))
=0.13885885 / 0.13826343
=1.0043

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)
=(511.199 / 985.753) / (486.634 / 1110.71)
=0.51858731 / 0.43812876
=1.1836

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)
=((145.88 + 437.669) / 767.506) / ((154.42 + 405.387) / 739.302)
=0.76031849 / 0.75721018
=1.0041

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
=(-25.045 - 16.631 - 153.025) / 767.506
=-0.2537

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 -3.99 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

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 1.80741.8511.91272.26382.01111.6391.51310.87510.63590.6299
GMI 1.07371.0661.08541.08791.08251.08531.06431.081.06651.0604
AQI 1.28831.25341.49531.82931.51151.4651.72671.19331.1611.3039
SGI 0.88270.87520.85780.84650.83430.82320.83340.83180.86090.8875
DEPI 0.94180.91050.90910.91560.92260.95120.96160.98751.00171.0043
SGAI 1.10061.12371.33261.35821.36021.35941.18241.17321.17881.1836
LVGI 0.94290.93241.01831.05031.05191.12790.97680.82690.86091.0041
TATA 0.1910.18720.04640.13610.0446-0.0396-0.039-0.2116-0.2541-0.2537
M-score -0.80-0.80-1.38-0.52-1.33-2.11-2.04-3.59-4.01-3.99
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