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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 15.96. The lowest was -5.16. And the median was -1.36.
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 * 1.219||+||0.528 * 1.0508||+||0.404 * 1.1636||+||0.892 * 1.1945||+||0.115 * 1.1753|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0025||+||4.679 * 0.15||-||0.327 * 0.8902|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $57 Mil.|
Revenue was 705.528 + 562.308 + 510.352 + 412.445 = $2,191 Mil.
Gross Profit was 145.523 + 115.055 + 113.62 + 94.597 = $469 Mil.
Total Current Assets was $160 Mil.
Total Assets was $2,316 Mil.
Property, Plant and Equipment(Net PPE) was $32 Mil.
Depreciation, Depletion and Amortization(DDA) was $12 Mil.
Selling, General & Admin. Expense(SGA) was $261 Mil.
Total Current Liabilities was $238 Mil.
Long-Term Debt was $935 Mil.
Net Income was 49.208 + 32.577 + 35.079 + 25.377 = $142 Mil.
Non Operating Income was 0.094 + 1.864 + 3.688 + 0.479 = $6 Mil.
Cash Flow from Operations was 24.905 + -61.503 + -42.983 + -131.667 = $-211 Mil.
|Accounts Receivable was $39 Mil.
Revenue was 541.67 + 497.275 + 454.87 + 340.064 = $1,834 Mil.
Gross Profit was 128.088 + 117.476 + 99.217 + 67.591 = $412 Mil.
Total Current Assets was $403 Mil.
Total Assets was $2,003 Mil.
Property, Plant and Equipment(Net PPE) was $22 Mil.
Depreciation, Depletion and Amortization(DDA) was $10 Mil.
Selling, General & Admin. Expense(SGA) was $218 Mil.
Total Current Liabilities was $219 Mil.
Long-Term Debt was $921 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)|
|=||(56.763 / 2190.633)||/||(38.983 / 1833.879)|
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)|
|=||(115.055 / 1833.879)||/||(145.523 / 2190.633)|
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 - (160.096 + 32.403) / 2316.138)||/||(1 - (402.648 + 22.099) / 2003.361)|
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))|
|=||(9.934 / (9.934 + 22.099))||/||(11.614 / (11.614 + 32.403))|
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)|
|=||(261.34 / 2190.633)||/||(218.226 / 1833.879)|
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)|
|=||((935.208 + 237.763) / 2316.138)||/||((921.048 + 218.636) / 2003.361)|
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|
|=||(142.241 - 6.125||-||-211.248)||/||2316.138|
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 -1.25 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