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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.
PetSmart Inc has a M-score of -2.80 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of PetSmart Inc was -1.66. The lowest was -3.82. And the median was -2.78.
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 PetSmart 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 * 0.9812||+||0.528 * 1.0033||+||0.404 * 1.0541||+||0.892 * 1.0141||+||0.115 * 0.9914|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9788||+||4.679 * -0.0735||-||0.327 * 1.0059|
|This Year (Apr14) TTM:||Last Year (Apr13) TTM:|
|Accounts Receivable was $66 Mil.|
Revenue was 1729.132 + 1804.866 + 1695.168 + 1705.997 = $6,935 Mil.
Gross Profit was 530.838 + 565.998 + 504.973 + 515.22 = $2,117 Mil.
Total Current Assets was $1,313 Mil.
Total Assets was $2,497 Mil.
Property, Plant and Equipment(Net PPE) was $949 Mil.
Depreciation, Depletion and Amortization(DDA) was $234 Mil.
Selling, General & Admin. Expense(SGA) was $1,419 Mil.
Total Current Liabilities was $800 Mil.
Long-Term Debt was $451 Mil.
Net Income was 103.766 + 131.516 + 92.221 + 93.368 = $421 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 136.506 + 273.907 + 107.238 + 86.789 = $604 Mil.
|Accounts Receivable was $66 Mil.
Revenue was 1710.596 + 1879.166 + 1629.511 + 1619.667 = $6,839 Mil.
Gross Profit was 529.746 + 593.438 + 482.512 + 488.815 = $2,095 Mil.
Total Current Assets was $1,280 Mil.
Total Assets was $2,474 Mil.
Property, Plant and Equipment(Net PPE) was $973 Mil.
Depreciation, Depletion and Amortization(DDA) was $238 Mil.
Selling, General & Admin. Expense(SGA) was $1,430 Mil.
Total Current Liabilities was $770 Mil.
Long-Term Debt was $462 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)|
|=||(65.944 / 6935.163)||/||(66.272 / 6838.94)|
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)|
|=||(565.998 / 6838.94)||/||(530.838 / 6935.163)|
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 - (1312.666 + 949.167) / 2497.055)||/||(1 - (1280.409 + 972.679) / 2474.184)|
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))|
|=||(237.613 / (237.613 + 972.679))||/||(234.369 / (234.369 + 949.167))|
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)|
|=||(1419.471 / 6935.163)||/||(1430.127 / 6838.94)|
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)|
|=||((450.538 + 800.213) / 2497.055)||/||((462.436 + 769.57) / 2474.184)|
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|
|=||(420.871 - 0||-||604.44)||/||2497.055|
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.
PetSmart Inc has a M-score of -2.80 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
PetSmart Inc Annual Data
PetSmart Inc Quarterly Data