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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.
During the past 13 years, the highest Beneish M-Score of Mercury Systems Inc was -1.63. The lowest was -3.69. And the median was -2.63.
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 Mercury Systems 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 * 0.9365||+||0.528 * 0.8812||+||0.404 * 0.9214||+||0.892 * 1.0681||+||0.115 * 1.0229|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8731||+||4.679 * -0.0637||-||0.327 * 1.223|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $35.2 Mil.|
Revenue was 54.061 + 46.199 + 55.5 + 53.09 = $208.9 Mil.
Gross Profit was 23.999 + 22.094 + 25.127 + 24.938 = $96.2 Mil.
Total Current Assets was $166.1 Mil.
Total Assets was $377.0 Mil.
Property, Plant and Equipment(Net PPE) was $13.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $15.1 Mil.
Selling, General & Admin. Expense(SGA) was $50.9 Mil.
Total Current Liabilities was $34.1 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 0.499 + -7.546 + -0.578 + -1.045 = $-8.7 Mil.
Non Operating Income was -0.006 + 0.323 + 0.337 + 0.44 = $1.1 Mil.
Cash Flow from Operations was 2.178 + 2.509 + 2.201 + 7.358 = $14.2 Mil.
|Accounts Receivable was $35.1 Mil.
Revenue was 50.726 + 40.876 + 54.123 + 49.804 = $195.5 Mil.
Gross Profit was 21.562 + 17.622 + 22.574 + 17.572 = $79.3 Mil.
Total Current Assets was $145.3 Mil.
Total Assets was $370.9 Mil.
Property, Plant and Equipment(Net PPE) was $14.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $17.3 Mil.
Selling, General & Admin. Expense(SGA) was $54.6 Mil.
Total Current Liabilities was $27.4 Mil.
Long-Term Debt was $0.0 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)|
|=||(35.155 / 208.85)||/||(35.143 / 195.529)|
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)|
|=||(22.094 / 195.529)||/||(23.999 / 208.85)|
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 - (166.052 + 13.343) / 376.99)||/||(1 - (145.343 + 14.565) / 370.885)|
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))|
|=||(17.33 / (17.33 + 14.565))||/||(15.118 / (15.118 + 13.343))|
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)|
|=||(50.874 / 208.85)||/||(54.552 / 195.529)|
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 + 34.084) / 376.99)||/||((0 + 27.417) / 370.885)|
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|
|=||(-8.67 - 1.094||-||14.246)||/||376.99|
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.
Mercury Systems Inc has a M-score of -2.92 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
Mercury Systems Inc Annual Data
Mercury Systems Inc Quarterly Data