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Kratos Defense & Security Solutions Inc (NAS:KTOS)
Beneish M-Score
-2.59 (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 -2.59 suggests that the company is not a manipulator.

KTOS' s Beneish M-Score Range Over the Past 10 Years
Min: -6   Max: 1.94
Current: -2.59

-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 -2.56.


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 * 0.7908+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
=-2.59

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

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

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)
=(194.7 / 801.8) / (255.1 / 830.8)
=0.24282864 / 0.30705344
=0.7908

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)
=(40.9 / 830.8) / (40.4 / 801.8)
=0.24626866 / 0.26452981
=0.931

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 - (310.4 + 60.7) / 921.5) / (1 - (376.7 + 82.6) / 1145.9)
=0.59728703 / 0.59917968
=0.9968

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
=801.8 / 830.8
=0.9651

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))
=0.30878661 / 0.3617245
=0.8537

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)
=0.21439262 / 0.2072701
=1.0344

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)
=0.68996202 / 0.77676935
=0.8882

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
=(21.6 - -4 - -0.8) / 921.5
=0.0286

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.


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

Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15
DSRI 0.8160.89830.55450.99291.24391.11640.94820.98720.80190.7908
GMI 1.05551.07541.05261.03761.05391.0230.99240.99880.96080.931
AQI 1.08590.95820.99651.0150.99711.03221.03761.02881.06160.9968
SGI 1.21031.06420.98030.88630.84290.84950.93910.97460.9590.9651
DEPI 1.06171.02961.04531.11831.26731.29361.20271.15560.87360.8537
SGAI 0.960.98781.01071.05711.0451.02790.98270.97181.031.0344
LVGI 1.07591.09311.01751.01981.07271.05611.0621.06561.02690.8882
TATA -0.136-0.1222-0.0492-0.0517-0.0438-0.0356-0.0415-0.0387-0.03890.0286
M-score -3.04-3.09-3.11-2.81-2.57-2.64-2.76-2.68-2.91-2.59
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