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Meritage Homes Corp (NYSE:MTH)
Beneish M-Score
-1.25 (As of Today)

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 -1.25 signals that the company is a manipulator.

MTH' s 10-Year Beneish M-Score Range
Min: -5.16   Max: 15.96
Current: -1.25

-5.16
15.96

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.


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 * 1.219+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
=-1.25

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

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

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)
=(56.763 / 2190.633) / (38.983 / 1833.879)
=0.02591169 / 0.02125713
=1.219

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)
=(115.055 / 1833.879) / (145.523 / 2190.633)
=0.22486325 / 0.21399979
=1.0508

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 - (160.096 + 32.403) / 2316.138) / (1 - (402.648 + 22.099) / 2003.361)
=0.91688794 / 0.78798279
=1.1636

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
=2190.633 / 1833.879
=1.1945

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))
=0.31011769 / 0.2638526
=1.1753

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)
=0.11929885 / 0.11899695
=1.0025

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)
=0.50643399 / 0.56888599
=0.8902

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
=(142.241 - 6.125 - -211.248) / 2316.138
=0.15

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.


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

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 2.58490.98091.20520.85195.83670.1860.78360.97131.26231.219
GMI 0.851.144236.9851-0.2297-5.80540.02341.08690.86410.84321.0508
AQI 3.78660.99660.96490.80250.051817.29891.10991.12170.99791.1636
SGI 1.47111.15330.67710.64990.63710.97050.91461.3991.5221.1945
DEPI 0.04530.87431.00830.894132.29310.03581.01711.01331.10521.1753
SGAI 0.98981.15821.17371.02531.07531.01881.11350.83770.87951.0025
LVGI 0.95820.99281.10251.04381.00320.98511.01190.93091.03150.8902
TATA 0.09590.0991-0.0618-0.3604-0.2143-0.02490.03690.21450.10170.15
M-score 0.80-1.8616.06-5.370.252.59-2.51-1.12-1.36-1.25

Meritage Homes Corp Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
DSRI 0.6520.97131.06621.21141.39511.26231.59291.28971.28911.219
GMI 0.97830.86410.85660.83970.81360.84320.83990.87270.96461.0508
AQI 1.0521.12170.96310.9531.12090.99791.11281.07481.14291.1636
SGI 1.30411.3991.50521.58241.53451.5221.42361.29961.22041.1945
DEPI 0.91121.01330.98560.96871.06191.10521.24571.32221.31951.1753
SGAI 0.91580.83770.81640.80590.83720.87950.90440.9460.99041.0025
LVGI 1.00130.93090.99660.95010.95561.03150.89660.92750.92250.8902
TATA 0.1120.21450.16920.16250.16130.10170.16330.16970.1790.15
M-score -1.99-1.12-1.24-1.06-0.88-1.36-0.75-1.12-1.08-1.25
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