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Kratos Defense & Security Solutions Inc (NAS:KTOS)
Beneish M-Score
-2.67 (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 -2.67 suggests that the company is not a manipulator.

KTOS' s 10-Year Beneish M-Score Range
Min: -6   Max: 1.94
Current: -2.67

-6
1.94

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 -2.57.


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 * 1.0153+0.528 * 1.0114+0.404 * 1.0288+0.892 * 0.9476+0.115 * 1.1556
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9724+4.679 * -0.0386-0.327 * 1.0656
=-2.67

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

This Year (Mar15) TTM:Last Year (Mar14) TTM:
Accounts Receivable was $238.6 Mil.
Revenue was 182.5 + 221.5 + 217.1 + 229.3 = $850.4 Mil.
Gross Profit was 46.9 + 56.2 + 53 + 56.4 = $212.5 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 $38.0 Mil.
Selling, General & Admin. Expense(SGA) was $172.6 Mil.
Total Current Liabilities was $223.0 Mil.
Long-Term Debt was $663.0 Mil.
Net Income was -16.3 + -2.2 + -10.9 + -49.9 = $-79.3 Mil.
Non Operating Income was -0.4 + 0.6 + -0.4 + -38.9 = $-39.1 Mil.
Cash Flow from Operations was -2.9 + 25.9 + -7.9 + -12 = $3.1 Mil.
Accounts Receivable was $248.0 Mil.
Revenue was 200.1 + 235.7 + 226.4 + 235.2 = $897.4 Mil.
Gross Profit was 52.6 + 61.5 + 52.3 + 60.4 = $226.8 Mil.
Total Current Assets was $413.3 Mil.
Total Assets was $1,196.4 Mil.
Property, Plant and Equipment(Net PPE) was $84.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $48.8 Mil.
Selling, General & Admin. Expense(SGA) was $187.3 Mil.
Total Current Liabilities was $244.1 Mil.
Long-Term Debt was $642.0 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)
=(238.6 / 850.4) / (248 / 897.4)
=0.28057385 / 0.27635391
=1.0153

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)
=(56.2 / 897.4) / (46.9 / 850.4)
=0.25273011 / 0.24988241
=1.0114

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 - (366.2 + 81.5) / 1122.6) / (1 - (413.3 + 84) / 1196.4)
=0.60119366 / 0.58433634
=1.0288

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
=850.4 / 897.4
=0.9476

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))
=(48.8 / (48.8 + 84)) / (38 / (38 + 81.5))
=0.36746988 / 0.31799163
=1.1556

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)
=(172.6 / 850.4) / (187.3 / 897.4)
=0.20296331 / 0.20871406
=0.9724

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)
=((663 + 223) / 1122.6) / ((642 + 244.1) / 1196.4)
=0.78923927 / 0.74063858
=1.0656

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
=(-79.3 - -39.1 - 3.1) / 1122.6
=-0.0386

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 -2.67 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

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 1.45790.58991.02680.84690.69761.31061.11580.81650.55420.9751
GMI 0.9751.27311.15650.80271.06950.92140.77051.00921.05111.0043
AQI 1.31871.26621.16920.91970.94361.05260.98460.97390.99651.0376
SGI 0.51421.00531.26451.47831.16881.22121.74761.35760.98080.9131
DEPI 1.30650.57451.13350.72050.80892.1090.78410.98621.04531.2027
SGAI 1.38361.07881.09890.61830.83460.98361.40411.01161.0190.9839
LVGI 0.99231.33741.0971.07740.92661.37031.11091.0121.01751.062
TATA -0.0146-0.1134-0.1077-0.3326-0.2806-0.0276-0.022-0.1319-0.0492-0.0414
M-score -2.47-3.30-2.61-3.88-3.88-2.14-2.07-2.96-3.12-2.75

Kratos Defense & Security Solutions Inc Quarterly Data

Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15
DSRI 0.81650.85830.8160.89830.55450.99291.20891.05130.97461.0153
GMI 1.00771.05561.05551.07541.05261.03761.0440.99451.00441.0114
AQI 0.97390.99481.08590.95820.99651.0150.99711.03221.03761.0288
SGI 1.35761.26471.21031.06420.98030.88630.86730.9020.91360.9476
DEPI 0.98621.06731.06171.02961.04531.11831.2011.18691.20271.1556
SGAI 1.02110.95680.960.98781.01071.05711.04161.02430.98290.9724
LVGI 1.0121.00851.07591.09311.01751.01981.07271.05611.0621.0656
TATA -0.1319-0.1226-0.136-0.1222-0.0492-0.0517-0.041-0.0326-0.0414-0.0386
M-score -2.96-2.91-3.04-3.09-3.11-2.81-2.58-2.66-2.75-2.67
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