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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 Penn National Gaming Inc was -1.56. The lowest was -3.92. And the median was -2.51.
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 Penn National Gaming 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 * 1.2805||+||0.528 * 1.0042||+||0.404 * 1.0149||+||0.892 * 1.0691||+||0.115 * 0.913|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0029||+||4.679 * -0.062||-||0.327 * 0.9664|
|This Year (Dec16) TTM:||Last Year (Dec15) TTM:|
|Accounts Receivable was $62 Mil.|
Revenue was 742.91 + 765.597 + 769.422 + 756.451 = $3,034 Mil.
Gross Profit was 323.128 + 320.853 + 328.348 + 323.055 = $1,295 Mil.
Total Current Assets was $399 Mil.
Total Assets was $4,974 Mil.
Property, Plant and Equipment(Net PPE) was $2,820 Mil.
Depreciation, Depletion and Amortization(DDA) was $271 Mil.
Selling, General & Admin. Expense(SGA) was $482 Mil.
Total Current Liabilities was $536 Mil.
Long-Term Debt was $4,787 Mil.
Net Income was 5.032 + 46.535 + 34.035 + 23.708 = $109 Mil.
Non Operating Income was 2.974 + 3.909 + 3.592 + 2.183 = $13 Mil.
Cash Flow from Operations was 93.302 + 121.858 + 118.33 + 71.333 = $405 Mil.
|Accounts Receivable was $45 Mil.
Revenue was 733.967 + 739.297 + 700.956 + 664.138 = $2,838 Mil.
Gross Profit was 305.004 + 315.927 + 304.537 + 291.314 = $1,217 Mil.
Total Current Assets was $372 Mil.
Total Assets was $5,139 Mil.
Property, Plant and Equipment(Net PPE) was $2,980 Mil.
Depreciation, Depletion and Amortization(DDA) was $259 Mil.
Selling, General & Admin. Expense(SGA) was $449 Mil.
Total Current Liabilities was $558 Mil.
Long-Term Debt was $5,133 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)|
|=||(61.855 / 3034.38)||/||(45.186 / 2838.358)|
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)|
|=||(1216.782 / 2838.358)||/||(1295.384 / 3034.38)|
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 - (399.265 + 2820.383) / 4974.484)||/||(1 - (372.476 + 2980.068) / 5138.752)|
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))|
|=||(259.461 / (259.461 + 2980.068))||/||(271.214 / (271.214 + 2820.383))|
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)|
|=||(481.88 / 3034.38)||/||(449.433 / 2838.358)|
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)|
|=||((4787.424 + 536.316) / 4974.484)||/||((5132.931 + 557.774) / 5138.752)|
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|
|=||(109.31 - 12.658||-||404.823)||/||4974.484|
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.
Penn National Gaming Inc has a M-score of -2.44 suggests that the company will not 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
Penn National Gaming Inc Annual Data
Penn National Gaming Inc Quarterly Data