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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 * 0.7456||+||0.528 * 0.9731||+||0.404 * 0.9659||+||0.892 * 1.1089||+||0.115 * 1.0763|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8969||+||4.679 * -0.0425||-||0.327 * 0.9675|
|This Year (Mar16) TTM:||Last Year (Mar15) TTM:|
|Accounts Receivable was $39.3 Mil.|
Revenue was 65.898 + 60.417 + 58.409 + 64.119 = $248.8 Mil.
Gross Profit was 30.491 + 28.578 + 27.529 + 31.267 = $117.9 Mil.
Total Current Assets was $206.6 Mil.
Total Assets was $414.8 Mil.
Property, Plant and Equipment(Net PPE) was $13.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $13.3 Mil.
Selling, General & Admin. Expense(SGA) was $49.6 Mil.
Total Current Liabilities was $42.0 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 4.526 + 4.793 + 1.96 + 5.93 = $17.2 Mil.
Non Operating Income was 0.144 + 0.083 + 0.071 + 0.054 = $0.4 Mil.
Cash Flow from Operations was 4.33 + 11.865 + 5.613 + 12.687 = $34.5 Mil.
|Accounts Receivable was $47.6 Mil.
Revenue was 59.578 + 57.089 + 54.061 + 53.678 = $224.4 Mil.
Gross Profit was 27.918 + 27.035 + 23.999 + 24.481 = $103.4 Mil.
Total Current Assets was $187.8 Mil.
Total Assets was $389.2 Mil.
Property, Plant and Equipment(Net PPE) was $12.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $14.2 Mil.
Selling, General & Admin. Expense(SGA) was $49.9 Mil.
Total Current Liabilities was $40.7 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)|
|=||(39.314 / 248.843)||/||(47.552 / 224.406)|
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)|
|=||(103.433 / 224.406)||/||(117.865 / 248.843)|
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 - (206.635 + 13.512) / 414.756)||/||(1 - (187.759 + 12.391) / 389.24)|
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))|
|=||(14.162 / (14.162 + 12.391))||/||(13.272 / (13.272 + 13.512))|
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)|
|=||(49.597 / 248.843)||/||(49.866 / 224.406)|
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 + 41.992) / 414.756)||/||((0 + 40.733) / 389.24)|
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|
|=||(17.209 - 0.352||-||34.495)||/||414.756|
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 -2.81 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