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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.
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.
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|
|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
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)|
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)|
|=||(128.088 / 1339.018)||/||(94.597 / 1906.26)|
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 - (392.819 + 26.726) / 2129.353)||/||(1 - (476.745 + 16.352) / 1770.985)|
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))|
|=||(8.661 / (8.661 + 16.352))||/||(10.289 / (10.289 + 26.726))|
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)|
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)|
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|
|=||(137.8 - -0.518||-||-217.824)||/||2129.353|
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.
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