Switch to:
GuruFocus has detected 6 Warning Signs with Kratos Defense & Security Solutions Inc $KTOS.
More than 500,000 people have already joined GuruFocus to track the stocks they follow and exchange investment ideas.
Kratos Defense & Security Solutions Inc (NAS:KTOS)
Beneish M-Score
-2.58 (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 -2.58 suggests that the company is not a manipulator.

KTOS' s Beneish M-Score Range Over the Past 10 Years
Min: -4.56   Max: -1.68
Current: -2.58

-4.56
-1.68

During the past 13 years, the highest Beneish M-Score of Kratos Defense & Security Solutions Inc was -1.68. The lowest was -4.56. And the median was -2.61.


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 * 1.0895+0.528 * 1.0725+0.404 * 0.9504+0.892 * 1.0181+0.115 * 0.9938
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.932+4.679 * -0.0518-0.327 * 0.9692
=-2.58

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

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $229.4 Mil.
Revenue was 182.1 + 165.4 + 168.2 + 153 = $668.7 Mil.
Gross Profit was 46.6 + 25.9 + 45.2 + 35.9 = $153.6 Mil.
Total Current Assets was $373.1 Mil.
Total Assets was $948.6 Mil.
Property, Plant and Equipment(Net PPE) was $49.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $22.8 Mil.
Selling, General & Admin. Expense(SGA) was $143.0 Mil.
Total Current Liabilities was $196.5 Mil.
Long-Term Debt was $431.0 Mil.
Net Income was -4.3 + -23.6 + -10.4 + -22.2 = $-60.5 Mil.
Non Operating Income was 0.4 + 0.1 + 0.2 + 0.3 = $1.0 Mil.
Cash Flow from Operations was -3.8 + 3.8 + -0.9 + -11.5 = $-12.4 Mil.
Accounts Receivable was $206.8 Mil.
Revenue was 177.5 + 161.7 + 160.5 + 157.1 = $656.8 Mil.
Gross Profit was 42.2 + 40.4 + 40.9 + 38.3 = $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.



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)
=(229.4 / 668.7) / (206.8 / 656.8)
=0.34305369 / 0.31485993
=1.0895

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)
=(161.8 / 656.8) / (153.6 / 668.7)
=0.24634592 / 0.22969942
=1.0725

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 - (373.1 + 49.8) / 948.6) / (1 - (320.4 + 56.2) / 903.3)
=0.55418511 / 0.58308425
=0.9504

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
=668.7 / 656.8
=1.0181

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))
=(25.5 / (25.5 + 56.2)) / (22.8 / (22.8 + 49.8))
=0.3121175 / 0.31404959
=0.9938

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)
=(143 / 668.7) / (150.7 / 656.8)
=0.21384776 / 0.2294458
=0.932

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)
=((431 + 196.5) / 948.6) / ((444.1 + 172.4) / 903.3)
=0.66150116 / 0.68249751
=0.9692

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
=(-60.5 - 1 - -12.4) / 948.6
=-0.0518

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 -2.58 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

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.02680.84690.69761.31061.11580.81650.62411.6281.1041.09
GMI 1.15650.80271.06950.92140.77051.00921.09541.03040.95491.072
AQI 1.16920.91970.94361.05260.98460.97390.99651.06770.94710.9504
SGI 1.26451.47831.16881.22121.74761.35760.87090.90390.86121.0177
DEPI 1.13350.72050.80892.1090.78410.98621.14211.0261.10430.9938
SGAI 1.09890.61830.83460.98361.40411.01161.02750.98341.13920.8646
LVGI 1.0971.07740.92661.37031.11091.0121.01751.060.87580.9692
TATA -0.1157-0.3326-0.2806-0.0276-0.022-0.1309-0.0482-0.03770.0593-0.0518
M-score -2.64-3.88-3.88-2.14-2.07-2.96-3.11-2.13-2.25-2.57

Kratos Defense & Security Solutions Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.28051.5771.02250.83430.82341.13960.99781.09441.08011.0895
GMI 1.07911.01351.03510.98980.95170.97050.95680.961.09191.0725
AQI 1.03221.06771.02881.06160.99680.94710.9880.95420.99050.9504
SGI 0.74060.93310.9410.92180.9270.83430.8770.94280.98911.0181
DEPI 1.50291.0261.24410.8750.84821.10430.84881.05070.94950.9938
SGAI 1.04080.98180.96931.03721.04261.14031.12971.02381.01650.932
LVGI 1.05611.061.06561.02690.88820.87580.88070.87871.04640.9692
TATA -0.0346-0.0377-0.035-0.03510.03110.05940.06350.0551-0.0501-0.0518
M-score -2.53-2.16-2.63-2.88-2.58-2.23-2.32-2.18-2.63-2.58
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
FEEDBACK