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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 -8.25. And the median was -1.47.
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 * 0.8571||+||0.528 * 1.1274||+||0.404 * 0.9527||+||0.892 * 1.2381||+||0.115 * 0.8912|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9924||+||4.679 * 0.0614||-||0.327 * 1.0294|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $60 Mil.|
Revenue was 676.81 + 603.299 + 523.791 + 705.528 = $2,509 Mil.
Gross Profit was 131.845 + 118.885 + 99.421 + 145.523 = $496 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.
Net Income was 30.308 + 29.133 + 16.4 + 49.208 = $125 Mil.
Non Operating Income was -4.119 + -0.033 + 0.292 + 0.094 = $-4 Mil.
Cash Flow from Operations was 23.702 + -38.757 + -38.191 + 18.381 = $-35 Mil.
|Accounts Receivable was $56 Mil.
Revenue was 562.308 + 510.352 + 412.445 + 541.67 = $2,027 Mil.
Gross Profit was 115.055 + 113.62 + 94.597 + 128.088 = $451 Mil.
Total Current Assets was $150 Mil.
Total Assets was $2,273 Mil.
Property, Plant and Equipment(Net PPE) was $32 Mil.
Depreciation, Depletion and Amortization(DDA) was $11 Mil.
Selling, General & Admin. Expense(SGA) was $244 Mil.
Total Current Liabilities was $274 Mil.
Long-Term Debt was $905 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)|
|=||(59.617 / 2509.428)||/||(56.178 / 2026.775)|
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)|
|=||(118.885 / 2026.775)||/||(131.845 / 2509.428)|
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 - (295.026 + 34.403) / 2663.886)||/||(1 - (150.14 + 31.979) / 2272.812)|
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))|
|=||(10.919 / (10.919 + 31.979))||/||(13.754 / (13.754 + 34.403))|
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)|
|=||(299.58 / 2509.428)||/||(243.823 / 2026.775)|
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)|
|=||((1145.958 + 275.672) / 2663.886)||/||((904.629 + 273.652) / 2272.812)|
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|
|=||(125.049 - -3.766||-||-34.865)||/||2663.886|
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 -2.08 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