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Kratos Defense & Security Solutions Inc (NAS:KTOS)
Beneish M-Score
-2.32 (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.

Kratos Defense & Security Solutions Inc has a M-score of -2.32 suggests that the company is not a manipulator.

KTOS' s Beneish M-Score Range Over the Past 10 Years
Min: -6   Max: 1.96
Current: -2.32

-6
1.96

During the past 13 years, the highest Beneish M-Score of Kratos Defense & Security Solutions Inc was 1.96. The lowest was -6.00. And the median was -2.53.


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 Kratos Defense & Security Solutions 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 * 0.9978+0.528 * 0.9568+0.404 * 0.988+0.892 * 0.877+0.115 * 0.8488
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1297+4.679 * 0.0635-0.327 * 0.8807
=-2.32

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

This Year (Mar16) TTM:Last Year (Mar15) TTM:
Accounts Receivable was $208.8 Mil.
Revenue was 153 + 177.5 + 161.7 + 160.5 = $652.7 Mil.
Gross Profit was 35.9 + 42.2 + 40.4 + 40.9 = $159.4 Mil.
Total Current Assets was $305.3 Mil.
Total Assets was $884.4 Mil.
Property, Plant and Equipment(Net PPE) was $53.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $24.7 Mil.
Selling, General & Admin. Expense(SGA) was $151.0 Mil.
Total Current Liabilities was $170.3 Mil.
Long-Term Debt was $444.4 Mil.
Net Income was -22.2 + -4 + 55.1 + -15 = $13.9 Mil.
Non Operating Income was 0.3 + -0.1 + -3.1 + -1 = $-3.9 Mil.
Cash Flow from Operations was -11.5 + -6.3 + -8.3 + -12.3 = $-38.4 Mil.
Accounts Receivable was $238.6 Mil.
Revenue was 157.1 + 192.1 + 190.8 + 204.2 = $744.2 Mil.
Gross Profit was 38.3 + 45.1 + 42.4 + 48.1 = $173.9 Mil.
Total Current Assets was $366.2 Mil.
Total Assets was $1,122.6 Mil.
Property, Plant and Equipment(Net PPE) was $81.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $29.7 Mil.
Selling, General & Admin. Expense(SGA) was $152.4 Mil.
Total Current Liabilities was $223.0 Mil.
Long-Term Debt was $663.0 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)
=(208.8 / 652.7) / (238.6 / 744.2)
=0.31990195 / 0.32061274
=0.9978

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)
=(173.9 / 744.2) / (159.4 / 652.7)
=0.23367374 / 0.24421633
=0.9568

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 - (305.3 + 53.8) / 884.4) / (1 - (366.2 + 81.5) / 1122.6)
=0.59396201 / 0.60119366
=0.988

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
=652.7 / 744.2
=0.877

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))
=(29.7 / (29.7 + 81.5)) / (24.7 / (24.7 + 53.8))
=0.26708633 / 0.31464968
=0.8488

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)
=(151 / 652.7) / (152.4 / 744.2)
=0.23134671 / 0.20478366
=1.1297

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)
=((444.4 + 170.3) / 884.4) / ((663 + 223) / 1122.6)
=0.69504749 / 0.78923927
=0.8807

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
=(13.9 - -3.9 - -38.4) / 884.4
=0.0635

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.

Kratos Defense & Security Solutions Inc has a M-score of -2.32 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.

Kratos Defense & Security Solutions Inc Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.67892.19860.81530.72471.31061.10160.8270.55421.61161.256
GMI 1.37630.99990.81560.9660.94030.82891.00161.05111.00431.0209
AQI 1.26621.16920.91970.94361.05260.98460.97390.99651.06770.9471
SGI 0.87340.59061.53561.12511.22121.77011.34030.98080.91310.757
DEPI 0.71631.39180.71150.79742.16650.78410.98621.04530.99511.244
SGAI 1.04081.43790.62930.90770.9771.27781.0111.0190.98391.148
LVGI 1.33741.0971.07740.92661.37031.11091.0121.01751.060.8758
TATA -0.1827-0.1157-0.3323-0.2666-0.0278-0.0222-0.1319-0.0481-0.04170.0593
M-score -3.59-2.28-3.85-3.89-2.12-2.01-2.97-3.11-2.18-2.15

Kratos Defense & Security Solutions Inc Quarterly Data

Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16
DSRI 0.62451.12661.41831.28051.5771.02250.83430.82341.13960.9978
GMI 1.0971.08411.10771.07911.01351.03510.98980.95170.97050.9568
AQI 0.99651.0150.99711.03221.06771.02881.06160.99680.94710.988
SGI 0.87040.78110.73930.74060.93310.9410.92180.9270.83430.877
DEPI 1.14211.23681.44011.50291.0261.24410.8750.84821.10430.8488
SGAI 1.01921.07011.05751.04080.98180.96931.03721.04261.14031.1297
LVGI 1.01751.01981.07271.05611.061.06561.02690.88820.87580.8807
TATA -0.0483-0.0508-0.0428-0.0346-0.0377-0.035-0.03510.03320.05940.0635
M-score -3.11-2.74-2.46-2.53-2.16-2.63-2.88-2.57-2.23-2.32
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