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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 8 years, the highest Beneish M-Score of Primo Water Corp was -1.84. The lowest was -10.60. And the median was -3.52.
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 Primo Water Corp 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 * 1.4393||+||0.528 * 0.8743||+||0.404 * 0.8499||+||0.892 * 1.0689||+||0.115 * 1.0234|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.901||+||4.679 * -0.1231||-||0.327 * 0.894|
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $15.8 Mil.|
Revenue was 35.504 + 34.385 + 32.296 + 31.476 = $133.7 Mil.
Gross Profit was 11.069 + 10.417 + 9.349 + 9.12 = $40.0 Mil.
Total Current Assets was $27.3 Mil.
Total Assets was $73.8 Mil.
Property, Plant and Equipment(Net PPE) was $34.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $10.2 Mil.
Selling, General & Admin. Expense(SGA) was $19.9 Mil.
Total Current Liabilities was $22.4 Mil.
Long-Term Debt was $16.0 Mil.
Net Income was 2.456 + 2.265 + 1.031 + 0.044 = $5.8 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.0 Mil.
Cash Flow from Operations was 3.509 + 5.071 + 2.715 + 3.579 = $14.9 Mil.
|Accounts Receivable was $10.3 Mil.
Revenue was 33.863 + 32.399 + 29.213 + 29.566 = $125.0 Mil.
Gross Profit was 9.504 + 8.194 + 7.656 + 7.324 = $32.7 Mil.
Total Current Assets was $21.3 Mil.
Total Assets was $66.7 Mil.
Property, Plant and Equipment(Net PPE) was $32.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $10.0 Mil.
Selling, General & Admin. Expense(SGA) was $20.6 Mil.
Total Current Liabilities was $17.6 Mil.
Long-Term Debt was $21.3 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)|
|=||(15.828 / 133.661)||/||(10.288 / 125.041)|
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)|
|=||(32.678 / 125.041)||/||(39.955 / 133.661)|
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 - (27.285 + 34.432) / 73.767)||/||(1 - (21.263 + 32.6) / 66.678)|
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))|
|=||(9.985 / (9.985 + 32.6))||/||(10.233 / (10.233 + 34.432))|
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)|
|=||(19.852 / 133.661)||/||(20.612 / 125.041)|
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)|
|=||((16.024 + 22.429) / 73.767)||/||((21.318 + 17.561) / 66.678)|
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|
|=||(5.796 - 0||-||14.874)||/||73.767|
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.
Primo Water Corp has a M-score of -2.66 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
Primo Water Corp Annual Data
Primo Water Corp Quarterly Data