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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 Ensco PLC was 0.02. The lowest was -4.66. And the median was -2.57.
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 Ensco PLC 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 * 0.8817||+||0.528 * 1.0752||+||0.404 * 0.7071||+||0.892 * 0.6553||+||0.115 * 1.2283|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.4126||+||4.679 * -0.0387||-||0.327 * 0.8172|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Mar17) TTM:||Last Year (Mar16) TTM:|
|Accounts Receivable was $323 Mil.|
Revenue was 471.1 + 504.6 + 548.2 + 909.6 = $2,434 Mil.
Gross Profit was 193 + 215.6 + 250.1 + 559.4 = $1,218 Mil.
Total Current Assets was $2,714 Mil.
Total Assets was $13,972 Mil.
Property, Plant and Equipment(Net PPE) was $11,121 Mil.
Depreciation, Depletion and Amortization(DDA) was $443 Mil.
Selling, General & Admin. Expense(SGA) was $103 Mil.
Total Current Liabilities was $546 Mil.
Long-Term Debt was $4,906 Mil.
Net Income was -25.7 + 39 + 85.3 + 590.6 = $689 Mil.
Non Operating Income was -6.3 + 4.9 + 18.7 + 261.4 = $279 Mil.
Cash Flow from Operations was 104.6 + 83.5 + 194.4 + 568.5 = $951 Mil.
|Accounts Receivable was $559 Mil.
Revenue was 814 + 828.3 + 1012.2 + 1059 = $3,714 Mil.
Gross Profit was 450.3 + 413.1 + 578.7 + 556.4 = $1,999 Mil.
Total Current Assets was $2,323 Mil.
Total Assets was $13,610 Mil.
Property, Plant and Equipment(Net PPE) was $11,097 Mil.
Depreciation, Depletion and Amortization(DDA) was $548 Mil.
Selling, General & Admin. Expense(SGA) was $112 Mil.
Total Current Liabilities was $1,507 Mil.
Long-Term Debt was $4,991 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)|
|=||(322.7 / 2433.5)||/||(558.5 / 3713.5)|
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)|
|=||(1998.5 / 3713.5)||/||(1218.1 / 2433.5)|
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 - (2713.6 + 11120.7) / 13972.3)||/||(1 - (2322.8 + 11097.1) / 13610)|
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))|
|=||(547.7 / (547.7 + 11097.1))||/||(442.8 / (442.8 + 11120.7))|
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)|
|=||(103.4 / 2433.5)||/||(111.7 / 3713.5)|
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)|
|=||((4905.9 + 546.1) / 13972.3)||/||((4991 + 1507.4) / 13610)|
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|
|=||(689.2 - 278.7||-||951)||/||13972.3|
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.
Ensco PLC has a M-score of -3.14 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
Ensco PLC Annual Data
Ensco PLC Quarterly Data