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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 Kratos Defense & Security Solutions Inc was 1.94. The lowest was -6.00. And the median was -2.58.
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 * 0.7908||+||0.528 * 0.931||+||0.404 * 0.9968||+||0.892 * 0.9651||+||0.115 * 0.8537|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0344||+||4.679 * 0.0286||-||0.327 * 0.8882|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $194.7 Mil.|
Revenue was 161.7 + 160.5 + 182.5 + 297.1 = $801.8 Mil.
Gross Profit was 40.4 + 40.9 + 46.9 + 83.9 = $212.1 Mil.
Total Current Assets was $310.4 Mil.
Total Assets was $921.5 Mil.
Property, Plant and Equipment(Net PPE) was $60.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $34.4 Mil.
Selling, General & Admin. Expense(SGA) was $171.9 Mil.
Total Current Liabilities was $187.3 Mil.
Long-Term Debt was $448.5 Mil.
Net Income was 55.1 + -15 + -16.3 + -2.2 = $21.6 Mil.
Non Operating Income was -3.1 + -1 + -0.4 + 0.5 = $-4.0 Mil.
Cash Flow from Operations was -8.3 + -12.2 + -2.9 + 22.6 = $-0.8 Mil.
|Accounts Receivable was $255.1 Mil.
Revenue was 190.8 + 204.2 + 200.1 + 235.7 = $830.8 Mil.
Gross Profit was 42.4 + 48.1 + 52.6 + 61.5 = $204.6 Mil.
Total Current Assets was $376.7 Mil.
Total Assets was $1,145.9 Mil.
Property, Plant and Equipment(Net PPE) was $82.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $36.9 Mil.
Selling, General & Admin. Expense(SGA) was $172.2 Mil.
Total Current Liabilities was $227.2 Mil.
Long-Term Debt was $662.9 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)|
|=||(194.7 / 801.8)||/||(255.1 / 830.8)|
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)|
|=||(40.9 / 830.8)||/||(40.4 / 801.8)|
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 - (310.4 + 60.7) / 921.5)||/||(1 - (376.7 + 82.6) / 1145.9)|
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))|
|=||(36.9 / (36.9 + 82.6))||/||(34.4 / (34.4 + 60.7))|
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)|
|=||(171.9 / 801.8)||/||(172.2 / 830.8)|
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)|
|=||((448.5 + 187.3) / 921.5)||/||((662.9 + 227.2) / 1145.9)|
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|
|=||(21.6 - -4||-||-0.8)||/||921.5|
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 -2.59 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
Kratos Defense & Security Solutions Inc Annual Data
Kratos Defense & Security Solutions Inc Quarterly Data