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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.
Kratos Defense & Security Solutions Inc has a M-score of -2.88 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Kratos Defense & Security Solutions Inc was 2.78. The lowest was -6.00. And the median was -2.54.
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 * 0.9929||+||0.528 * 1.0376||+||0.404 * 1.015||+||0.892 * 0.8863||+||0.115 * 0.8845|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0221||+||4.679 * -0.0634||-||0.327 * 1.0198|
|This Year (Mar14) TTM:||Last Year (Mar13) TTM:|
|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 $72.9 Mil.
Selling, General & Admin. Expense(SGA) was $181.1 Mil.
Total Current Liabilities was $244.1 Mil.
Long-Term Debt was $642.0 Mil.
Net Income was -15 + -7.4 + -9.9 + -9.6 = $-41.9 Mil.
Non Operating Income was 0.2 + -0.2 + 0.8 + 0.2 = $1.0 Mil.
Cash Flow from Operations was 1.2 + 26.1 + 2.6 + 3.1 = $33.0 Mil.
|Accounts Receivable was $281.8 Mil.
Revenue was 252.8 + 263.6 + 276.3 + 219.8 = $1,012.5 Mil.
Gross Profit was 65.7 + 68 + 74.1 + 57.7 = $265.5 Mil.
Total Current Assets was $455.1 Mil.
Total Assets was $1,270.6 Mil.
Property, Plant and Equipment(Net PPE) was $84.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $58.6 Mil.
Selling, General & Admin. Expense(SGA) was $199.9 Mil.
Total Current Liabilities was $275.6 Mil.
Long-Term Debt was $647.2 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)|
|=||(248 / 897.4)||/||(281.8 / 1012.5)|
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)|
|=||(61.5 / 1012.5)||/||(52.6 / 897.4)|
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 - (413.3 + 84) / 1196.4)||/||(1 - (455.1 + 84) / 1270.6)|
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))|
|=||(58.6 / (58.6 + 84))||/||(72.9 / (72.9 + 84))|
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)|
|=||(181.1 / 897.4)||/||(199.9 / 1012.5)|
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)|
|=||((642 + 244.1) / 1196.4)||/||((647.2 + 275.6) / 1270.6)|
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|
|=||(-41.9 - 1||-||33)||/||1196.4|
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 -2.88 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