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Meritage Homes Corp (NYSE:MTH)
Beneish M-Score
-1.11 (As of Today)

Warning Sign:

Beneish M-Score -1.10 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 -1.11 signals that the company is a manipulator.

MTH' s 10-Year Beneish M-Score Range
Min: -8.25   Max: 15.96
Current: -1.11

-8.25
15.96

During the past 13 years, the highest Beneish M-Score of Meritage Homes Corp was 15.96. The lowest was -8.25. And the median was -1.44.


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 * 1.2834+0.528 * 0.8582+0.404 * 1.0748+0.892 * 1.3059+0.115 * 1.3222
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9414+4.679 * 0.1735-0.327 * 0.9275
=-1.11

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

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $51 Mil.
Revenue was 510.352 + 412.445 + 541.67 + 497.275 = $1,962 Mil.
Gross Profit was 113.62 + 94.597 + 128.088 + 117.476 = $454 Mil.
Total Current Assets was $341 Mil.
Total Assets was $2,193 Mil.
Property, Plant and Equipment(Net PPE) was $29 Mil.
Depreciation, Depletion and Amortization(DDA) was $10 Mil.
Selling, General & Admin. Expense(SGA) was $232 Mil.
Total Current Liabilities was $236 Mil.
Long-Term Debt was $905 Mil.
Net Income was 35.079 + 25.377 + 46.089 + 38.191 = $145 Mil.
Non Operating Income was 3.688 + 0.479 + 0.883 + 0.651 = $6 Mil.
Cash Flow from Operations was -42.983 + -131.667 + -46.75 + -20.005 = $-241 Mil.
Accounts Receivable was $30 Mil.
Revenue was 454.87 + 340.064 + 364.586 + 342.643 = $1,502 Mil.
Gross Profit was 99.217 + 67.591 + 68.973 + 62.424 = $298 Mil.
Total Current Assets was $384 Mil.
Total Assets was $1,767 Mil.
Property, Plant and Equipment(Net PPE) was $17 Mil.
Depreciation, Depletion and Amortization(DDA) was $9 Mil.
Selling, General & Admin. Expense(SGA) was $189 Mil.
Total Current Liabilities was $193 Mil.
Long-Term Debt was $798 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)
=(50.695 / 1961.742) / (30.246 / 1502.163)
=0.02584183 / 0.02013497
=1.2834

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)
=(94.597 / 1502.163) / (113.62 / 1961.742)
=0.19851707 / 0.23131533
=0.8582

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 - (341.269 + 28.828) / 2192.678) / (1 - (383.518 + 17.013) / 1767.477)
=0.83121233 / 0.77338828
=1.0748

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
=1961.742 / 1502.163
=1.3059

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))
=(9.24 / (9.24 + 17.013)) / (10.458 / (10.458 + 28.828))
=0.35195978 / 0.2662017
=1.3222

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)
=(232.273 / 1961.742) / (188.92 / 1502.163)
=0.1184014 / 0.12576531
=0.9414

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)
=((904.771 + 235.756) / 2192.678) / ((798.215 + 193.015) / 1767.477)
=0.52015253 / 0.56081635
=0.9275

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
=(144.736 - 5.701 - -241.405) / 2192.678
=0.1735

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 -1.11 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 1.32152.58490.98091.20520.85195.83670.1860.78360.98041.2506
GMI 0.99310.851.144236.9851-0.2297-5.80540.02341.08690.89630.8129
AQI 0.96633.78660.99660.96490.80250.06910.87641.10411.96528.467
SGI 1.38681.47111.15330.67710.64990.63710.97050.91461.3861.5363
DEPI 0.82490.04530.87431.00830.894131.58871.21121.22351.19390.0236
SGAI 0.96150.98981.15821.17371.02531.1040.99231.11350.84560.8713
LVGI 1.03390.95820.99281.10251.04381.02860.97121.01330.93281.017
TATA 0.05270.09590.0991-0.0618-0.3604-0.2173-0.02490.03690.2080.1059
M-score -1.630.80-1.8616.06-5.370.15-3.90-2.49-0.771.55

Meritage Homes Corp Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.78790.8740.65640.98041.07191.21231.38921.25061.58151.2834
GMI 1.05991.04151.00770.89630.87210.83750.79580.81290.81770.8582
AQI 0.07271.19041.03420.132215.17214.117516.36578.4671.11281.0748
SGI 0.96791.12271.29541.3861.49711.58131.54111.53631.43391.3059
DEPI 43.59751.2791.141647.51560.02350.02130.0230.02361.24571.3222
SGAI 1.08851.01030.92190.84560.82080.80650.83360.87130.89790.9414
LVGI 1.02471.01291.00180.94420.980.93360.94051.0170.89660.9275
TATA 0.08430.10630.10740.2080.16430.15880.15940.10590.16730.1735
M-score 2.22-1.86-1.983.814.384.135.141.55-0.75-1.11
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