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Kratos Defense & Security Solutions Inc (NAS:KTOS)
Beneish M-Score
-2.63 (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 -2.25 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: -2.63

-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 * 1.104+0.528 * 0.9549+0.404 * 0.9471+0.892 * 0.8612+0.115 * 1.1043
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1392+4.679 * 0.0593-0.327 * 0.8758
=-2.25

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Dec15) TTM:Last Year (Dec14) TTM:
Accounts Receivable was $206.8 Mil.
Revenue was $657.1 Mil.
Gross Profit was $161.8 Mil.
Total Current Assets was $320.4 Mil.
Total Assets was $903.3 Mil.
Property, Plant and Equipment(Net PPE) was $56.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $25.5 Mil.
Selling, General & Admin. Expense(SGA) was $150.7 Mil.
Total Current Liabilities was $172.4 Mil.
Long-Term Debt was $444.1 Mil.
Net Income was $19.8 Mil.
Non Operating Income was $-4.1 Mil.
Cash Flow from Operations was $-29.7 Mil.
Accounts Receivable was $217.5 Mil.
Revenue was $763.0 Mil.
Gross Profit was $179.4 Mil.
Total Current Assets was $373.2 Mil.
Total Assets was $1,131.2 Mil.
Property, Plant and Equipment(Net PPE) was $61.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $32.4 Mil.
Selling, General & Admin. Expense(SGA) was $153.6 Mil.
Total Current Liabilities was $226.1 Mil.
Long-Term Debt was $655.4 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)
=(206.8 / 657.1) / (217.5 / 763)
=0.31471618 / 0.28505898
=1.104

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)
=(179.4 / 763) / (161.8 / 657.1)
=0.23512451 / 0.24623345
=0.9549

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 - (320.4 + 56.2) / 903.3) / (1 - (373.2 + 61.6) / 1131.2)
=0.58308425 / 0.61562942
=0.9471

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
=657.1 / 763
=0.8612

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))
=(32.4 / (32.4 + 61.6)) / (25.5 / (25.5 + 56.2))
=0.34468085 / 0.3121175
=1.1043

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)
=(150.7 / 657.1) / (153.6 / 763)
=0.22934104 / 0.20131062
=1.1392

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)
=((444.1 + 172.4) / 903.3) / ((655.4 + 226.1) / 1131.2)
=0.68249751 / 0.77926096
=0.8758

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
=(19.8 - -4.1 - -29.7) / 903.3
=0.0593

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 -2.25 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 local exchange's currency.

Kratos Defense & Security Solutions Inc Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.58991.02680.84690.69761.31061.11580.81650.62411.6281.104
GMI 1.27311.15650.80271.06950.92140.77051.00921.09541.03040.9549
AQI 1.26621.16920.91970.94361.05260.98460.97390.99651.06770.9471
SGI 1.00531.26451.47831.16881.22121.74761.35760.87090.90390.8612
DEPI 0.57451.13350.72050.80892.1090.78410.98621.14211.0261.1043
SGAI 1.07881.09890.61830.83460.98361.40411.01161.02750.98341.1392
LVGI 1.33741.0971.07740.92661.37031.11091.0121.01751.060.8758
TATA -0.1783-0.1157-0.3326-0.2806-0.0276-0.022-0.1309-0.0482-0.03770.0593
M-score -3.61-2.64-3.88-3.88-2.14-2.07-2.96-3.11-2.13-2.25
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