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Morningstar Inc (NAS:MORN)
Beneish M-Score
-2.85 (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.

Morningstar Inc has a M-score of -2.85 suggests that the company is not a manipulator.

MORN' s 10-Year Beneish M-Score Range
Min: -2.85   Max: -2.34
Current: -2.85

-2.85
-2.34

During the past 13 years, the highest Beneish M-Score of Morningstar Inc was -2.34. The lowest was -2.85. And the median was -2.54.


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 Morningstar 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 * 0.8654+0.528 * 1.0203+0.404 * 1.0015+0.892 * 1.0607+0.115 * 1.118
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9113+4.679 * -0.0658-0.327 * 1.101
=-2.85

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

This Year (Dec13) TTM:Last Year (Dec12) TTM:
Accounts Receivable was $118.1 Mil.
Revenue was 180.5 + 173.482 + 175.428 + 168.856 = $698.3 Mil.
Gross Profit was 107.562 + 101.06 + 125.155 + 120.846 = $454.6 Mil.
Total Current Assets was $446.9 Mil.
Total Assets was $1,030.7 Mil.
Property, Plant and Equipment(Net PPE) was $105.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $45.7 Mil.
Selling, General & Admin. Expense(SGA) was $210.5 Mil.
Total Current Liabilities was $280.3 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 31.327 + 31.463 + 31.121 + 29.618 = $123.5 Mil.
Non Operating Income was 1.852 + 0.141 + 2.447 + 0.204 = $4.6 Mil.
Cash Flow from Operations was 54.445 + 47.078 + 58.462 + 26.673 = $186.7 Mil.
Accounts Receivable was $128.6 Mil.
Revenue was 170.609 + 160.952 + 165.968 + 160.759 = $658.3 Mil.
Gross Profit was 109.969 + 100.384 + 116.516 + 110.443 = $437.3 Mil.
Total Current Assets was $474.6 Mil.
Total Assets was $1,042.0 Mil.
Property, Plant and Equipment(Net PPE) was $84.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $43.1 Mil.
Selling, General & Admin. Expense(SGA) was $217.7 Mil.
Total Current Liabilities was $257.4 Mil.
Long-Term Debt was $0.0 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)
=(118.073 / 698.266) / (128.628 / 658.288)
=0.16909459 / 0.19539776
=0.8654

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)
=(101.06 / 658.288) / (107.562 / 698.266)
=0.66431714 / 0.65107423
=1.0203

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 - (446.893 + 104.986) / 1030.668) / (1 - (474.61 + 84.022) / 1041.952)
=0.46454241 / 0.46386014
=1.0015

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
=698.266 / 658.288
=1.0607

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))
=(43.096 / (43.096 + 84.022)) / (45.693 / (45.693 + 104.986))
=0.33902358 / 0.3032473
=1.118

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)
=(210.482 / 698.266) / (217.741 / 658.288)
=0.30143527 / 0.3307686
=0.9113

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)
=((0 + 280.291) / 1030.668) / ((0 + 257.365) / 1041.952)
=0.27195081 / 0.24700274
=1.101

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
=(123.529 - 4.644 - 186.658) / 1030.668
=-0.0658

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.

Morningstar Inc has a M-score of -2.85 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.

Morningstar Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 1.17891.11670.98811.06480.89240.93361.19110.87531.02170.8654
GMI 0.98930.97080.98950.98040.99651.01311.021.00791.13831.0226
AQI 0.85320.87171.7690.93141.01911.09591.05340.88191.10541.0015
SGI 1.28791.26411.38771.38051.15480.95331.15941.13691.04261.0607
DEPI 0.91280.99020.66450.92191.71820.88020.89341.00911.13921.118
SGAI 0.75710.84340.86661.00740.97860.97641.04541.00320.97240.9113
LVGI 0.91660.70180.95650.89720.86550.77751.03050.99251.06971.101
TATA -0.1195-0.0645-0.11-0.0578-0.0727-0.0207-0.0381-0.0563-0.0343-0.0658
M-score -2.62-2.38-2.36-2.37-2.64-2.57-2.34-2.78-2.47-2.85

Morningstar Inc Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 0.97640.87530.90630.92831.00291.02170.92610.89530.87870.8654
GMI 0.99551.00791.02451.03461.05941.07111.04271.03111.02021.0203
AQI 0.88270.88190.91320.98381.05451.10541.05921.05260.97841.0015
SGI 1.18441.13691.10641.06891.03571.04261.04061.04731.06521.0607
DEPI 0.96061.00911.0761.13481.14051.13921.13211.11641.12951.118
SGAI 0.99991.00320.95740.96210.94110.97240.97160.98550.96710.9113
LVGI 1.0170.99251.03611.111.11531.06971.05431.02830.96981.101
TATA -0.0481-0.0563-0.0507-0.054-0.0451-0.0343-0.0456-0.0544-0.0574-0.0658
M-score -2.62-2.78-2.73-2.74-2.61-2.50-2.68-2.74-2.77-2.85
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