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GuruFocus has detected 2 Warning Signs with M.D.C. Holdings Inc $MDC.
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M.D.C. Holdings Inc (NYSE:MDC)
Beneish M-Score
-1.92 (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.

M.D.C. Holdings Inc has a M-score of -1.92 signals that the company is a manipulator.

MDC' s Beneish M-Score Range Over the Past 10 Years
Min: -5.29   Max: 2.41
Current: -1.92

-5.29
2.41

During the past 13 years, the highest Beneish M-Score of M.D.C. Holdings Inc was 2.41. The lowest was -5.29. And the median was -1.85.


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 M.D.C. Holdings 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 * 1.4983+0.528 * 0.995+0.404 * 1.0427+0.892 * 1.2164+0.115 * 0.8144
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9101+4.679 * -0.021-0.327 * 0.9957
=-1.92

* 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 $42 Mil.
Revenue was 672.338 + 595.42 + 571.511 + 396.744 = $2,236 Mil.
Gross Profit was 92.517 + 98.936 + 93.859 + 65.055 = $350 Mil.
Total Current Assets was $2,148 Mil.
Total Assets was $2,529 Mil.
Property, Plant and Equipment(Net PPE) was $28 Mil.
Depreciation, Depletion and Amortization(DDA) was $5 Mil.
Selling, General & Admin. Expense(SGA) was $251 Mil.
Total Current Liabilities was $252 Mil.
Long-Term Debt was $956 Mil.
Net Income was 40.376 + 26.359 + 26.913 + 9.563 = $103 Mil.
Non Operating Income was 31.689 + -1.884 + 7.714 + 2.804 = $40 Mil.
Cash Flow from Operations was 124.82 + 13.183 + -7.101 + -14.985 = $116 Mil.
Accounts Receivable was $23 Mil.
Revenue was 530.101 + 468.487 + 461.708 + 377.919 = $1,838 Mil.
Gross Profit was 70.185 + 81.905 + 76.689 + 57.802 = $287 Mil.
Total Current Assets was $2,064 Mil.
Total Assets was $2,416 Mil.
Property, Plant and Equipment(Net PPE) was $28 Mil.
Depreciation, Depletion and Amortization(DDA) was $4 Mil.
Selling, General & Admin. Expense(SGA) was $226 Mil.
Total Current Liabilities was $230 Mil.
Long-Term Debt was $929 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)
=(42.492 / 2236.013) / (23.314 / 1838.215)
=0.01900347 / 0.01268296
=1.4983

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)
=(286.581 / 1838.215) / (350.367 / 2236.013)
=0.15590179 / 0.15669274
=0.995

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 - (2147.763 + 28.041) / 2528.589) / (1 - (2064.401 + 28.226) / 2415.899)
=0.13951852 / 0.13381023
=1.0427

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
=2236.013 / 1838.215
=1.2164

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))
=(4.069 / (4.069 + 28.226)) / (5.132 / (5.132 + 28.041))
=0.12599474 / 0.15470413
=0.8144

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)
=(250.54 / 2236.013) / (226.317 / 1838.215)
=0.11204765 / 0.12311781
=0.9101

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)
=((956.131 + 252.388) / 2528.589) / ((929.135 + 230.472) / 2415.899)
=0.47794205 / 0.47998985
=0.9957

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
=(103.211 - 40.323 - 115.917) / 2528.589
=-0.021

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.

M.D.C. Holdings Inc has a M-score of -1.92 signals that the company is likely to 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.

M.D.C. Holdings Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.66430.23510.95430.82212.87190.92170.58981.20410.72451.4983
GMI 1.54871.02650.72511.23891.28380.85180.86261.04431.06070.9982
AQI 1.12280.56890.94111.08331.93281.2251.51721.06280.96241.0427
SGI 0.6010.50530.61611.03180.88151.41511.40911.01321.1271.2164
DEPI 1.10652.66581.57090.99710.82751.18771.1430.96430.90580.8144
SGAI 1.23751.1871.19440.92220.92490.66010.90470.94060.9880.9101
LVGI 1.14091.10420.99111.09970.86771.02730.97320.89691.00490.9957
TATA -0.1703-0.3475-0.07330.05380.01370.07590.21640.09880.0193-0.0162
M-score -2.76-5.29-3.34-2.22-0.24-1.74-1.30-1.73-2.52-1.89

M.D.C. Holdings Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.81471.19121.06680.94341.03590.7291.01441.54121.27381.4983
GMI 1.00971.01951.07541.0981.0621.08011.02241.00111.01490.995
AQI 0.82851.06281.07231.14451.08670.96240.90430.99031.05561.0427
SGI 1.03881.02411.071.05491.10571.11991.09191.14371.1831.2164
DEPI 1.00190.96430.89250.86720.89810.90580.99180.94930.89420.8144
SGAI 0.94890.93050.89970.94390.96330.99431.03451.00440.95740.9101
LVGI 0.96460.89690.89510.95810.91681.00491.00441.01431.0130.9957
TATA 0.10980.0970.03730.02830.02430.01440.0280.04410.0142-0.021
M-score -2.15-1.75-2.07-2.23-2.15-2.54-2.29-1.66-1.98-1.92
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