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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 * 1.1361||+||0.528 * 1.0447||+||0.404 * 0.9268||+||0.892 * 1.0461||+||0.115 * 0.9264|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0382||+||4.679 * 0.0126||-||0.327 * 1.0408|
|This Year (May15) TTM:||Last Year (May14) TTM:|
|Accounts Receivable was $26 Mil.|
Revenue was 432.004 + 543.6 + 484.501 + 418.622 = $1,879 Mil.
Gross Profit was 164.677 + 214.442 + 204.913 + 162.637 = $747 Mil.
Total Current Assets was $673 Mil.
Total Assets was $924 Mil.
Property, Plant and Equipment(Net PPE) was $210 Mil.
Depreciation, Depletion and Amortization(DDA) was $57 Mil.
Selling, General & Admin. Expense(SGA) was $583 Mil.
Total Current Liabilities was $317 Mil.
Long-Term Debt was $204 Mil.
Net Income was 6.874 + 33.089 + 17.86 + 9.158 = $67 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 28.339 + 111.9 + 24.36 + -109.31 = $55 Mil.
|Accounts Receivable was $22 Mil.
Revenue was 419.059 + 515.786 + 465.462 + 395.641 = $1,796 Mil.
Gross Profit was 167.714 + 214.436 + 202.23 + 161.299 = $746 Mil.
Total Current Assets was $712 Mil.
Total Assets was $946 Mil.
Property, Plant and Equipment(Net PPE) was $188 Mil.
Depreciation, Depletion and Amortization(DDA) was $46 Mil.
Selling, General & Admin. Expense(SGA) was $537 Mil.
Total Current Liabilities was $306 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)|
|=||(25.938 / 1878.727)||/||(21.824 / 1795.948)|
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)|
|=||(214.442 / 1795.948)||/||(164.677 / 1878.727)|
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 - (672.576 + 209.912) / 924.412)||/||(1 - (711.593 + 187.804) / 945.673)|
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))|
|=||(46.124 / (46.124 + 187.804))||/||(56.753 / (56.753 + 209.912))|
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)|
|=||(583.39 / 1878.727)||/||(537.186 / 1795.948)|
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)|
|=||((204.319 + 316.591) / 924.412)||/||((206.026 + 305.962) / 945.673)|
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|
|=||(66.981 - 0||-||55.289)||/||924.412|
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 -2.29 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