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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 * 1.059||+||0.528 * 0.9636||+||0.404 * 0.889||+||0.892 * 1.1279||+||0.115 * 1.0617|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8384||+||4.679 * -0.0606||-||0.327 * 1.1783|
* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $42.0 Mil.|
Revenue was 58.409 + 64.119 + 59.578 + 57.089 = $239.2 Mil.
Gross Profit was 27.529 + 31.267 + 27.918 + 27.035 = $113.7 Mil.
Total Current Assets was $200.9 Mil.
Total Assets was $401.4 Mil.
Property, Plant and Equipment(Net PPE) was $13.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $13.5 Mil.
Selling, General & Admin. Expense(SGA) was $48.8 Mil.
Total Current Liabilities was $42.8 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 1.96 + 5.93 + 3.675 + 0.265 = $11.8 Mil.
Non Operating Income was 0.071 + 0.054 + 0.007 + 0.398 = $0.5 Mil.
Cash Flow from Operations was 5.613 + 12.687 + 9.114 + 8.228 = $35.6 Mil.
|Accounts Receivable was $35.2 Mil.
Revenue was 54.061 + 53.678 + 53.393 + 50.932 = $212.1 Mil.
Gross Profit was 23.999 + 24.481 + 24.376 + 24.325 = $97.2 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 $51.7 Mil.
Total Current Liabilities was $34.1 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)|
|=||(41.993 / 239.195)||/||(35.155 / 212.064)|
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)|
|=||(31.267 / 212.064)||/||(27.529 / 239.195)|
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 - (200.867 + 13.493) / 401.388)||/||(1 - (166.052 + 13.343) / 376.99)|
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))|
|=||(15.118 / (15.118 + 13.343))||/||(13.511 / (13.511 + 13.493))|
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)|
|=||(48.846 / 239.195)||/||(51.654 / 212.064)|
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 + 42.761) / 401.388)||/||((0 + 34.084) / 376.99)|
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|
|=||(11.83 - 0.53||-||35.642)||/||401.388|
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 -2.68 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