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Meritage Homes Corp (NYSE:MTH)
Beneish M-Score
-0.73 (As of Today)

Warning Sign:

Beneish M-Score -0.73 higher than -2.22, which implies that it might have manipulated its financial results.

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.

Meritage Homes Corp has a M-score of -0.73 signals that the company is a manipulator.

MTH' s 10-Year Beneish M-Score Range
Min: -8.25   Max: 17.29
Current: -0.73

-8.25
17.29

During the past 13 years, the highest Beneish M-Score of Meritage Homes Corp was 17.29. The lowest was -8.25. And the median was -1.48.


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 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 * 1.5929+0.528 * 0.8399+0.404 * 1.1128+0.892 * 1.4236+0.115 * 1.2457
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9044+4.679 * 0.1673-0.327 * 0.8966
=-0.73

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Mar14) TTM:Last Year (Mar13) TTM:
Accounts Receivable was $54 Mil.
Revenue was 412.445 + 541.67 + 497.275 + 454.87 = $1,906 Mil.
Gross Profit was 94.597 + 128.088 + 117.476 + 99.217 = $439 Mil.
Total Current Assets was $393 Mil.
Total Assets was $2,129 Mil.
Property, Plant and Equipment(Net PPE) was $27 Mil.
Depreciation, Depletion and Amortization(DDA) was $10 Mil.
Selling, General & Admin. Expense(SGA) was $225 Mil.
Total Current Liabilities was $218 Mil.
Long-Term Debt was $905 Mil.
Net Income was 25.377 + 46.089 + 38.191 + 28.143 = $138 Mil.
Non Operating Income was 0.479 + 0.883 + 0.651 + -2.531 = $-1 Mil.
Cash Flow from Operations was -131.667 + -46.75 + -20.005 + -19.402 = $-218 Mil.
Accounts Receivable was $24 Mil.
Revenue was 340.064 + 368.595 + 345.945 + 284.414 = $1,339 Mil.
Gross Profit was 67.591 + 72.485 + 65.409 + 53.743 = $259 Mil.
Total Current Assets was $477 Mil.
Total Assets was $1,771 Mil.
Property, Plant and Equipment(Net PPE) was $16 Mil.
Depreciation, Depletion and Amortization(DDA) was $9 Mil.
Selling, General & Admin. Expense(SGA) was $175 Mil.
Total Current Liabilities was $160 Mil.
Long-Term Debt was $881 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)
=(54.165 / 1906.26) / (23.885 / 1339.018)
=0.02841428 / 0.0178377
=1.5929

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)
=(128.088 / 1339.018) / (94.597 / 1906.26)
=0.19359561 / 0.23049217
=0.8399

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 - (392.819 + 26.726) / 2129.353) / (1 - (476.745 + 16.352) / 1770.985)
=0.80297067 / 0.72156907
=1.1128

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
=1906.26 / 1339.018
=1.4236

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))
=(8.661 / (8.661 + 16.352)) / (10.289 / (10.289 + 26.726))
=0.34625994 / 0.27796839
=1.2457

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)
=(225.228 / 1906.26) / (174.923 / 1339.018)
=0.11815177 / 0.13063529
=0.9044

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)
=((904.913 + 217.963) / 2129.353) / ((881.219 + 160.385) / 1770.985)
=0.52733201 / 0.58814953
=0.8966

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
=(137.8 - -0.518 - -217.824) / 2129.353
=0.1673

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 -0.73 signals that the company is likely to 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 own currency.

Meritage Homes Corp Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 1.32152.58490.98092.65411.77611.27110.1860.78360.97131.2623
GMI 0.99310.851.144236.9851-0.2297-5.80540.02341.08690.86410.8432
AQI 0.96633.78660.99660.96490.80250.051817.29891.10991.12170.9978
SGI 1.38681.47111.15330.67710.64990.63710.97050.91461.3991.522
DEPI 0.82490.04530.87431.00830.894132.29310.03581.01711.01331.1052
SGAI 0.96150.98981.15821.17371.02531.07531.01881.11350.83770.8795
LVGI 1.03390.95820.99281.10251.04381.00320.98511.01190.93091.0315
TATA 0.05270.09590.0991-0.0618-0.3604-0.2143-0.02490.03690.21450.1059
M-score -1.630.80-1.8617.39-4.52-3.952.59-2.51-1.12-1.34

Meritage Homes Corp Quarterly Data

Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14
DSRI 0.78360.78650.87040.6520.97131.06621.21141.39511.26231.5929
GMI 1.08691.05051.02150.97830.86410.85660.83970.81360.84320.8399
AQI 1.10991.1451.21631.0521.12170.96310.9531.12090.99781.1128
SGI 0.91460.96971.12731.30411.3991.50521.58241.53451.5221.4236
DEPI 1.01711.03860.9890.91121.01330.98560.96871.06191.10521.2457
SGAI 1.11351.08661.00610.91580.83770.81640.80590.83720.87950.9044
LVGI 1.01191.00761.00761.00130.93090.99660.95010.95561.03150.8966
TATA 0.03690.06540.10930.1120.21450.16920.16250.16130.10590.1673
M-score -2.51-2.33-1.88-1.99-1.12-1.24-1.06-0.88-1.34-0.73
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