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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 Overstock.com Inc was 1.24. The lowest was -6.10. And the median was -3.19.
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 Overstock.com Inc 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 * 0.8927||+||0.528 * 1.0192||+||0.404 * 2.9647||+||0.892 * 1.1407||+||0.115 * 1.3863|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8194||+||4.679 * 0.0391||-||0.327 * 0.7689|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $15 Mil.|
Revenue was 352.991 + 332.545 + 341.207 + 397.593 = $1,424 Mil.
Gross Profit was 67.058 + 62.625 + 63.996 + 71.735 = $265 Mil.
Total Current Assets was $184 Mil.
Total Assets was $298 Mil.
Property, Plant and Equipment(Net PPE) was $48 Mil.
Depreciation, Depletion and Amortization(DDA) was $16 Mil.
Selling, General & Admin. Expense(SGA) was $195 Mil.
Total Current Liabilities was $166 Mil.
Long-Term Debt was $0 Mil.
Net Income was 1.617 + 1.909 + 3.97 + 73.581 = $81 Mil.
Non Operating Income was -0.35 + 0.524 + 0.459 + -0.595 = $0 Mil.
Cash Flow from Operations was 28.803 + 0.38 + -29.679 + 69.861 = $69 Mil.
|Accounts Receivable was $15 Mil.
Revenue was 301.426 + 293.204 + 311.994 + 342.034 = $1,249 Mil.
Gross Profit was 59.15 + 57.839 + 58.936 + 61.211 = $237 Mil.
Total Current Assets was $139 Mil.
Total Assets was $179 Mil.
Property, Plant and Equipment(Net PPE) was $27 Mil.
Depreciation, Depletion and Amortization(DDA) was $15 Mil.
Selling, General & Admin. Expense(SGA) was $208 Mil.
Total Current Liabilities was $130 Mil.
Long-Term Debt was $0 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)|
|=||(14.941 / 1424.336)||/||(14.672 / 1248.658)|
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)|
|=||(62.625 / 1248.658)||/||(67.058 / 1424.336)|
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 - (184.143 + 47.622) / 298.37)||/||(1 - (139.035 + 26.892) / 179.438)|
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))|
|=||(14.907 / (14.907 + 26.892))||/||(16.495 / (16.495 + 47.622))|
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)|
|=||(194.574 / 1424.336)||/||(208.16 / 1248.658)|
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)|
|=||((0 + 166.162) / 298.37)||/||((0 + 129.955) / 179.438)|
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|
|=||(81.077 - 0.038||-||69.365)||/||298.37|
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.
Overstock.com Inc has a M-score of -1.32 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
Overstock.com Inc Annual Data
Overstock.com Inc Quarterly Data