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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 Pier 1 Imports Inc was 6.80. The lowest was -4.03. And the median was -2.74.
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 Pier 1 Imports 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 * 1.0038||+||0.528 * 1.0582||+||0.404 * 0.8913||+||0.892 * 1.0391||+||0.115 * 0.8615|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0106||+||4.679 * -0.0482||-||0.327 * 1.0782|
|This Year (Aug15) TTM:||Last Year (Aug14) TTM:|
|Accounts Receivable was $26 Mil.|
Revenue was 429.956 + 432.004 + 543.6 + 484.501 = $1,890 Mil.
Gross Profit was 149.518 + 164.677 + 214.442 + 204.913 = $734 Mil.
Total Current Assets was $636 Mil.
Total Assets was $890 Mil.
Property, Plant and Equipment(Net PPE) was $212 Mil.
Depreciation, Depletion and Amortization(DDA) was $59 Mil.
Selling, General & Admin. Expense(SGA) was $577 Mil.
Total Current Liabilities was $318 Mil.
Long-Term Debt was $204 Mil.
Net Income was 3.166 + 6.874 + 33.089 + 17.86 = $61 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was -60.685 + 28.339 + 111.9 + 24.36 = $104 Mil.
|Accounts Receivable was $25 Mil.
Revenue was 418.622 + 419.059 + 515.786 + 465.462 = $1,819 Mil.
Gross Profit was 162.637 + 167.714 + 214.436 + 202.23 = $747 Mil.
Total Current Assets was $635 Mil.
Total Assets was $885 Mil.
Property, Plant and Equipment(Net PPE) was $203 Mil.
Depreciation, Depletion and Amortization(DDA) was $47 Mil.
Selling, General & Admin. Expense(SGA) was $549 Mil.
Total Current Liabilities was $276 Mil.
Long-Term Debt was $206 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)|
|=||(25.583 / 1890.061)||/||(24.526 / 1818.929)|
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)|
|=||(164.677 / 1818.929)||/||(149.518 / 1890.061)|
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 - (636.247 + 212.048) / 890.226)||/||(1 - (635.419 + 203.104) / 885.309)|
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))|
|=||(46.781 / (46.781 + 203.104))||/||(58.872 / (58.872 + 212.048))|
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)|
|=||(576.952 / 1890.061)||/||(549.394 / 1818.929)|
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)|
|=||((203.892 + 318.079) / 890.226)||/||((205.599 + 275.842) / 885.309)|
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|
|=||(60.989 - 0||-||103.914)||/||890.226|
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.
Pier 1 Imports Inc has a M-score of -2.72 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
Pier 1 Imports Inc Annual Data
Pier 1 Imports Inc Quarterly Data