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Beneish M-Score -1.06 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.
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 -1.40.
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 * 1.2891||+||0.528 * 0.9646||+||0.404 * 1.1429||+||0.892 * 1.2204||+||0.115 * 1.3195|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9904||+||4.679 * 0.1826||-||0.327 * 0.9225|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|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.
Net Income was 32.577 + 35.079 + 25.377 + 46.089 = $139 Mil.
Non Operating Income was 1.864 + 3.688 + 0.479 + 0.883 = $7 Mil.
Cash Flow from Operations was -61.503 + -42.983 + -131.667 + -46.75 = $-283 Mil.
|Accounts Receivable was $36 Mil.
Revenue was 497.275 + 454.87 + 340.064 + 368.595 = $1,661 Mil.
Gross Profit was 117.476 + 99.217 + 67.591 + 72.485 = $357 Mil.
Total Current Assets was $347 Mil.
Total Assets was $1,874 Mil.
Property, Plant and Equipment(Net PPE) was $19 Mil.
Depreciation, Depletion and Amortization(DDA) was $9 Mil.
Selling, General & Admin. Expense(SGA) was $202 Mil.
Total Current Liabilities was $255 Mil.
Long-Term Debt was $798 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)|
|=||(56.178 / 2026.775)||/||(35.711 / 1660.804)|
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)|
|=||(113.62 / 1660.804)||/||(115.055 / 2026.775)|
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 - (150.14 + 31.979) / 2272.812)||/||(1 - (347.045 + 18.69) / 1874.086)|
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))|
|=||(9.452 / (9.452 + 18.69))||/||(10.919 / (10.919 + 31.979))|
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)|
|=||(243.823 / 2026.775)||/||(201.735 / 1660.804)|
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)|
|=||((904.629 + 273.652) / 2272.812)||/||((798.337 + 254.894) / 1874.086)|
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|
|=||(139.122 - 6.914||-||-282.903)||/||2272.812|
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 -1.06 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