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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 Meritage Homes Corp was 15.98. The lowest was -8.24. And the median was -1.27.
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 Meritage Homes Corp 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 * 1.0868||+||0.528 * 1.0671||+||0.404 * 1.0544||+||0.892 * 1.1787||+||0.115 * 0.9152|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9264||+||4.679 * 0.0844||-||0.327 * 0.9579|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $76 Mil.|
Revenue was 760.211 + 805.167 + 597.766 + 788.656 = $2,952 Mil.
Gross Profit was 137.83 + 143.867 + 103.796 + 157.829 = $543 Mil.
Total Current Assets was $184 Mil.
Total Assets was $2,873 Mil.
Property, Plant and Equipment(Net PPE) was $34 Mil.
Depreciation, Depletion and Amortization(DDA) was $15 Mil.
Selling, General & Admin. Expense(SGA) was $327 Mil.
Total Current Liabilities was $329 Mil.
Long-Term Debt was $1,140 Mil.
Net Income was 36.887 + 39.878 + 20.969 + 52.897 = $151 Mil.
Non Operating Income was 1.875 + 2.118 + 0.126 + 2.576 = $7 Mil.
Cash Flow from Operations was -37.726 + -28.802 + -81.817 + 49.911 = $-98 Mil.
|Accounts Receivable was $60 Mil.
Revenue was 676.81 + 603.299 + 518.712 + 705.528 = $2,504 Mil.
Gross Profit was 131.845 + 118.885 + 95.641 + 145.523 = $492 Mil.
Total Current Assets was $295 Mil.
Total Assets was $2,664 Mil.
Property, Plant and Equipment(Net PPE) was $34 Mil.
Depreciation, Depletion and Amortization(DDA) was $14 Mil.
Selling, General & Admin. Expense(SGA) was $300 Mil.
Total Current Liabilities was $276 Mil.
Long-Term Debt was $1,146 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)|
|=||(76.371 / 2951.8)||/||(59.617 / 2504.349)|
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)|
|=||(491.894 / 2504.349)||/||(543.322 / 2951.8)|
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 - (184.286 + 33.983) / 2873.155)||/||(1 - (295.026 + 34.403) / 2663.886)|
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))|
|=||(13.754 / (13.754 + 34.403))||/||(15.417 / (15.417 + 33.983))|
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)|
|=||(327.125 / 2951.8)||/||(299.58 / 2504.349)|
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)|
|=||((1139.815 + 328.947) / 2873.155)||/||((1145.958 + 275.672) / 2663.886)|
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|
|=||(150.631 - 6.695||-||-98.434)||/||2873.155|
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.
Meritage Homes Corp has a M-score of -1.77 signals that the company is likely to 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
Meritage Homes Corp Annual Data
Meritage Homes Corp Quarterly Data