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GuruFocus has detected 7 Warning Signs with Mercury Systems Inc $MRCY.
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Mercury Systems Inc (NAS:MRCY)
Beneish M-Score
-2.44 (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.

Mercury Systems Inc has a M-score of -2.44 suggests that the company is not a manipulator.

MRCY' s Beneish M-Score Range Over the Past 10 Years
Min: -3.69   Max: -1.63
Current: -2.44

-3.69
-1.63

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 -2.62.


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 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 * 1.3966+0.528 * 1.0475+0.404 * 1.3552+0.892 * 1.3895+0.115 * 1.3046
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9611+4.679 * -0.0309-0.327 * 3.2534
=-2.44

* 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 $68.8 Mil.
Revenue was 98.014 + 87.649 + 85.43 + 65.898 = $337.0 Mil.
Gross Profit was 47.389 + 39.444 + 38.176 + 30.491 = $155.5 Mil.
Total Current Assets was $224.8 Mil.
Total Assets was $755.3 Mil.
Property, Plant and Equipment(Net PPE) was $39.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $24.4 Mil.
Selling, General & Admin. Expense(SGA) was $65.1 Mil.
Total Current Liabilities was $68.5 Mil.
Long-Term Debt was $180.7 Mil.
Net Income was 5.204 + 3.819 + 8.463 + 4.526 = $22.0 Mil.
Non Operating Income was -0.087 + 0.6 + 2.056 + 0.144 = $2.7 Mil.
Cash Flow from Operations was 14.238 + 10.283 + 15.132 + 2.971 = $42.6 Mil.
Accounts Receivable was $35.5 Mil.
Revenue was 60.417 + 58.409 + 64.119 + 59.578 = $242.5 Mil.
Gross Profit was 29.739 + 28.302 + 31.267 + 27.918 = $117.2 Mil.
Total Current Assets was $199.0 Mil.
Total Assets was $408.1 Mil.
Property, Plant and Equipment(Net PPE) was $13.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $13.2 Mil.
Selling, General & Admin. Expense(SGA) was $48.8 Mil.
Total Current Liabilities was $41.4 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)
=(68.827 / 336.991) / (35.468 / 242.523)
=0.20423988 / 0.14624592
=1.3966

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)
=(117.226 / 242.523) / (155.5 / 336.991)
=0.48336034 / 0.46143666
=1.0475

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 - (224.847 + 39.379) / 755.277) / (1 - (198.978 + 13.324) / 408.092)
=0.65016014 / 0.47976927
=1.3552

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
=336.991 / 242.523
=1.3895

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))
=(13.249 / (13.249 + 13.324)) / (24.359 / (24.359 + 39.379))
=0.49858879 / 0.3821739
=1.3046

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)
=(65.107 / 336.991) / (48.752 / 242.523)
=0.19320101 / 0.20102011
=0.9611

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)
=((180.71 + 68.52) / 755.277) / ((0 + 41.392) / 408.092)
=0.32998489 / 0.10142811
=3.2534

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
=(22.012 - 2.713 - 42.624) / 755.277
=-0.0309

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 -2.44 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 local exchange's currency.

Mercury Systems Inc Annual Data

Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15Jun16
DSRI 1.10560.94620.85751.35911.06550.830.92591.19780.75042.0095
GMI 1.06460.9731.03580.99090.99151.00631.40270.88650.96721.0162
AQI 1.06251.00040.70651.0210.93331.48081.35850.93440.95931.2284
SGI 0.94870.87570.99331.05761.14451.03660.81931.07461.12511.1503
DEPI 0.64440.8941.13591.35231.09490.86380.77771.03581.02591.4318
SGAI 1.07980.81210.81680.95170.98140.92731.20170.91220.81140.9392
LVGI 1.04221.07370.56140.51750.66010.94080.85911.07060.97643.9442
TATA -0.0837-0.1497-0.06030.0509-0.041-0.0284-0.0318-0.0728-0.0576-0.0265
M-score -2.83-3.36-2.81-1.65-2.39-2.52-2.51-2.66-2.86-2.34

Mercury Systems Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.92231.37371.2380.75041.0590.67280.74562.00951.18261.3966
GMI 0.88530.95630.97320.96720.95710.9470.95741.00061.03991.0475
AQI 0.92140.88710.87540.95930.8890.95620.96591.22841.36361.3552
SGI 1.08461.10971.14541.12511.12791.11141.10891.15031.25171.3895
DEPI 1.02290.95940.96821.02591.06171.06661.07631.43181.29471.3046
SGAI 0.8730.84210.83140.81140.83840.87060.89690.93920.95470.9611
LVGI 1.2231.5561.18410.97641.17830.99060.96753.94423.0733.2534
TATA -0.0637-0.0611-0.0664-0.0576-0.0608-0.0572-0.0398-0.025-0.03-0.0309
M-score -2.91-2.55-2.54-2.86-2.69-2.96-2.80-2.34-2.70-2.44
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