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Rackspace Hosting Inc (NYSE:RAX)
Beneish M-Score
-3.83 (As of Today)

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.

Rackspace Hosting Inc has a M-score of -3.83 suggests that the company is not a manipulator.

RAX' s Beneish M-Score Range Over the Past 10 Years
Min: -3.83   Max: -2.59
Current: -3.83

-3.83
-2.59

During the past 12 years, the highest Beneish M-Score of Rackspace Hosting Inc was -2.59. The lowest was -3.83. And the median was -3.40.


Definition

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 Rackspace Hosting 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 * 0.9659+0.528 * 1.0156+0.404 * 0.9733+0.892 * 1.0902+0.115 * 0.9051
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9459+4.679 * -0.2439-0.327 * 1.7862
=-3.83

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Jun16) TTM:Last Year (Jun15) TTM:
Accounts Receivable was $169 Mil.
Revenue was 523.6 + 518.1 + 522.8 + 508.9 = $2,073 Mil.
Gross Profit was 352.1 + 337.7 + 337.6 + 337.7 = $1,365 Mil.
Total Current Assets was $773 Mil.
Total Assets was $1,997 Mil.
Property, Plant and Equipment(Net PPE) was $1,072 Mil.
Depreciation, Depletion and Amortization(DDA) was $414 Mil.
Selling, General & Admin. Expense(SGA) was $604 Mil.
Total Current Liabilities was $248 Mil.
Long-Term Debt was $646 Mil.
Net Income was 35.8 + 48.8 + 28.3 + 36.5 = $149 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 164.9 + 156.2 + 204 + 111.4 = $637 Mil.
Accounts Receivable was $160 Mil.
Revenue was 489.4 + 480.2 + 472.5 + 459.7 = $1,902 Mil.
Gross Profit was 324 + 317.4 + 313.4 + 316.8 = $1,272 Mil.
Total Current Assets was $538 Mil.
Total Assets was $1,833 Mil.
Property, Plant and Equipment(Net PPE) was $1,151 Mil.
Depreciation, Depletion and Amortization(DDA) was $388 Mil.
Selling, General & Admin. Expense(SGA) was $586 Mil.
Total Current Liabilities was $291 Mil.
Long-Term Debt was $169 Mil.



1. DSRI = Days Sales in Receivables Index

Measured as the ratio of days’ sales in receivables in year t to year t-1.

A large increase in DSR could be indicative of revenue inflation.

DSRI=(Receivables_t / Revenue_t) / (Receivables_t-1 / Revenue_t-1)
=(168.6 / 2073.4) / (160.1 / 1901.8)
=0.08131571 / 0.08418341
=0.9659

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.

GMI=GrossMargin_t-1 / GrossMargin_t
=(GrossProfit_t-1 / Revenue_t-1) / (GrossProfit_t / Revenue_t)
=(1271.6 / 1901.8) / (1365.1 / 2073.4)
=0.66862972 / 0.65838719
=1.0156

3. AQI = Asset Quality Index

AQI is the ratio of asset quality in year t to year t-1.

Asset quality is measured as the ratio of non-current assets other than plant, property and equipment to total assets.

AQI=(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) / (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)
=(1 - (772.6 + 1071.6) / 1996.8) / (1 - (537.9 + 1150.8) / 1832.6)
=0.07642228 / 0.07852232
=0.9733

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.

SGI=Sales_t / Sales_t-1
=Revenue_t / Revenue_t-1
=2073.4 / 1901.8
=1.0902

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))
=(388.1 / (388.1 + 1150.8)) / (413.9 / (413.9 + 1071.6))
=0.25219312 / 0.27862673
=0.9051

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)
=(604.1 / 2073.4) / (585.8 / 1901.8)
=0.29135719 / 0.30802398
=0.9459

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)
=((646.1 + 248.2) / 1996.8) / ((168.8 + 290.7) / 1832.6)
=0.44786659 / 0.25073666
=1.7862

8. TATA = Total Accruals to Total Assets

Total accruals calculated as the change in working capital accounts other than cash less depreciation.

TATA=(IncomefromContinuingOperations_t - CashFlowsfromOperations_t) / TotalAssets_t
=(NetIncome_t - NonOperatingIncome_t - CashFlowsfromOperations_t) / TotalAssets_t
=(149.4 - 0 - 636.5) / 1996.8
=-0.2439

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.

Rackspace Hosting Inc has a M-score of -3.83 suggests that the company will not be a manipulator.


Related Terms

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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Rackspace Hosting Inc Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.82721.0590.99311.09611.05791.13851.08040.9992
GMI 0.99680.99271.00091.02690.97381.00351.00751.02
AQI 0.81441.46791.61421.24380.84890.96840.83160.8122
SGI 1.46941.18251.2411.31331.27721.17231.16911.1153
DEPI 0.99890.88880.9371.00820.92650.98550.99971.0069
SGAI 0.99470.91420.96090.84120.98651.05020.94630.953
LVGI 0.88990.72430.82970.88730.81230.77531.28761.8123
TATA -0.1676-0.2492-0.2543-0.2416-0.227-0.2405-0.2692-0.229
M-score -3.04-3.15-3.16-3.06-3.26-3.27-3.66-3.77

Rackspace Hosting Inc Quarterly Data

Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16
DSRI 1.0541.09761.01351.08041.11721.06681.15260.99921.00870.9659
GMI 1.01721.02581.01521.00751.00261.00061.01691.02231.02341.0156
AQI 0.85470.83050.83240.83160.84390.82210.95430.81220.83840.9733
SGI 1.16311.16261.16931.16911.16321.14641.12771.11531.10011.0902
DEPI 0.97090.97720.97190.99971.00221.04231.04941.00690.98290.9051
SGAI 1.0421.01020.98450.94630.9590.95710.94490.9530.94350.9459
LVGI 0.84820.96981.00481.28761.15941.2511.5621.81231.88651.7862
TATA -0.248-0.2468-0.2367-0.2692-0.258-0.2342-0.2306-0.2299-0.2235-0.2439
M-score -3.46-3.45-3.49-3.66-3.54-3.53-3.48-3.77-3.76-3.83
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