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ITT Educational Services Inc (NYSE:ESI)
Beneish M-Score
-3.44 (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 -3.44 suggests that the company is not a manipulator.

ESI' s 10-Year Beneish M-Score Range
Min: -4.46   Max: -0.21
Current: -3.44

-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 -2.99.


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 * 0.6417+0.528 * 0.9911+0.404 * 1.4304+0.892 * 0.9304+0.115 * 0.9513
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9063+4.679 * -0.1547-0.327 * 1.0847
=-3.44

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

This Year (Mar15) TTM:Last Year (Mar14) TTM:
Accounts Receivable was $46.2 Mil.
Revenue was 229.975 + 243.203 + 242.561 + 238.096 = $953.8 Mil.
Gross Profit was 126.422 + 136.351 + 125.022 + 121.82 = $509.6 Mil.
Total Current Assets was $292.7 Mil.
Total Assets was $736.6 Mil.
Property, Plant and Equipment(Net PPE) was $152.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $26.0 Mil.
Selling, General & Admin. Expense(SGA) was $415.9 Mil.
Total Current Liabilities was $316.5 Mil.
Long-Term Debt was $214.0 Mil.
Net Income was 10.447 + 14.917 + 10.322 + 0.392 = $36.1 Mil.
Non Operating Income was 0 + 0 + 16.631 + 0 = $16.6 Mil.
Cash Flow from Operations was 33.533 + 45.174 + 33.122 + 21.563 = $133.4 Mil.
Accounts Receivable was $77.4 Mil.
Revenue was 237.923 + 267.173 + 259.617 + 260.459 = $1,025.2 Mil.
Gross Profit was 117.808 + 148.741 + 139.413 + 136.918 = $542.9 Mil.
Total Current Assets was $398.8 Mil.
Total Assets was $778.4 Mil.
Property, Plant and Equipment(Net PPE) was $164.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $26.4 Mil.
Selling, General & Admin. Expense(SGA) was $493.2 Mil.
Total Current Liabilities was $458.1 Mil.
Long-Term Debt was $58.8 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)
=(46.2 / 953.835) / (77.384 / 1025.172)
=0.04843605 / 0.07548392
=0.6417

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)
=(136.351 / 1025.172) / (126.422 / 953.835)
=0.52955016 / 0.53428004
=0.9911

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 - (292.672 + 152.181) / 736.58) / (1 - (398.819 + 164.072) / 778.431)
=0.3960561 / 0.27689031
=1.4304

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
=953.835 / 1025.172
=0.9304

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))
=(26.422 / (26.422 + 164.072)) / (25.975 / (25.975 + 152.181))
=0.13870253 / 0.14579919
=0.9513

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)
=(415.896 / 953.835) / (493.189 / 1025.172)
=0.4360251 / 0.48107927
=0.9063

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)
=((214.003 + 316.474) / 736.58) / ((58.782 + 458.067) / 778.431)
=0.72018925 / 0.66396251
=1.0847

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
=(36.078 - 16.631 - 133.392) / 736.58
=-0.1547

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 -3.44 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

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 1.20440.6081.40791.68532.20790.66680.74281.91271.51310.5196
GMI 0.9880.98810.90040.94460.94390.99381.05041.08541.06431.049
AQI 1.06951.16591.26690.24972.81071.88461.05631.49531.72671.5895
SGI 1.11361.10141.14751.16771.29931.21020.93950.85780.83340.8969
DEPI 1.27120.96420.96621.11921.04110.94910.97860.90910.96160.9657
SGAI 0.99381.03411.0660.97490.95690.96651.05171.33261.18240.9522
LVGI 0.89721.82951.05350.83411.03461.06390.90551.01830.97681.0831
TATA -0.073-0.0817-0.04940.0469-0.0016-0.2733-0.10990.0464-0.039-0.1657
M-score -2.44-3.35-2.18-1.74-0.41-3.54-3.22-1.38-2.04-3.55

ITT Educational Services Inc Quarterly Data

Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15
DSRI 1.91272.26382.01111.6391.51310.87510.63590.62990.51960.6417
GMI 1.08541.08791.08251.08531.06431.081.06651.06041.0490.9911
AQI 1.49531.82931.51151.4651.72671.19331.1611.30391.58951.4304
SGI 0.85780.84650.83430.82320.83340.83180.86090.88750.89690.9304
DEPI 0.90910.91560.92260.95120.96160.98751.00171.00430.96570.9513
SGAI 1.33261.35821.36021.35941.18241.17321.17881.18360.95220.9063
LVGI 1.01831.05031.05191.12790.97680.82690.86091.00411.08311.0847
TATA 0.04640.13610.0446-0.0396-0.039-0.2116-0.2541-0.2537-0.1657-0.1547
M-score -1.38-0.52-1.33-2.11-2.04-3.59-4.01-3.99-3.55-3.44
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