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Rackspace Hosting Inc (NYSE:RAX)
Beneish M-Score
-3.47 (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 -3.47 suggests that the company is not a manipulator.

RAX' s 10-Year Beneish M-Score Range
Min: -3.61   Max: -2.59
Current: -3.47

-3.61
-2.59

During the past 10 years, the highest Beneish M-Score of Rackspace Hosting Inc was -2.59. The lowest was -3.61. And the median was -3.28.


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 * 1.0135+0.528 * 1.0268+0.404 * 0.8324+0.892 * 1.1693+0.115 * 0.9721
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9257+4.679 * -0.2358-0.327 * 1.0048
=-3.47

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

This Year (Sep14) TTM:Last Year (Sep13) TTM:
Accounts Receivable was $135 Mil.
Revenue was 459.776 + 441.112 + 421.047 + 408.103 = $1,730 Mil.
Gross Profit was 316.822 + 296.061 + 280.63 + 274.282 = $1,168 Mil.
Total Current Assets was $554 Mil.
Total Assets was $1,725 Mil.
Property, Plant and Equipment(Net PPE) was $1,014 Mil.
Depreciation, Depletion and Amortization(DDA) was $364 Mil.
Selling, General & Admin. Expense(SGA) was $552 Mil.
Total Current Liabilities was $284 Mil.
Long-Term Debt was $78 Mil.
Net Income was 25.74 + 22.451 + 25.446 + 20.798 = $94 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 125.428 + 124.537 + 141.659 + 109.518 = $501 Mil.
Accounts Receivable was $114 Mil.
Revenue was 388.636 + 375.847 + 362.2 + 352.909 = $1,480 Mil.
Gross Profit was 261.232 + 258.189 + 248.59 + 257.453 = $1,025 Mil.
Total Current Assets was $443 Mil.
Total Assets was $1,452 Mil.
Property, Plant and Equipment(Net PPE) was $851 Mil.
Depreciation, Depletion and Amortization(DDA) was $294 Mil.
Selling, General & Admin. Expense(SGA) was $510 Mil.
Total Current Liabilities was $277 Mil.
Long-Term Debt was $26 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)
=(134.555 / 1730.038) / (113.543 / 1479.592)
=0.07777575 / 0.0767394
=1.0135

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)
=(296.061 / 1479.592) / (316.822 / 1730.038)
=0.69307214 / 0.67501118
=1.0268

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 - (553.954 + 1014.168) / 1724.542) / (1 - (442.663 + 850.905) / 1451.769)
=0.09070234 / 0.10897119
=0.8324

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
=1730.038 / 1479.592
=1.1693

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))
=(294.238 / (294.238 + 850.905)) / (364.354 / (364.354 + 1014.168))
=0.25694433 / 0.26430772
=0.9721

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)
=(552.29 / 1730.038) / (510.26 / 1479.592)
=0.31923576 / 0.34486534
=0.9257

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)
=((78.214 + 284.263) / 1724.542) / ((26.369 + 277.317) / 1451.769)
=0.2101874 / 0.20918342
=1.0048

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
=(94.435 - 0 - 501.142) / 1724.542
=-0.2358

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 -3.47 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

Dec03Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.82721.0590.99311.09611.05791.1385
GMI 0.99680.99271.00090.97350.9711.0592
AQI 0.81441.46791.61421.24380.84890.9684
SGI 1.46941.18251.2411.31331.27721.1723
DEPI 0.99890.88880.9371.00820.92650.9857
SGAI 0.99470.91420.96091.02421.02370.8313
LVGI 0.88990.72430.82970.88730.81230.7753
TATA -0.1676-0.2492-0.2808-0.2416-0.227-0.2395
M-score -3.04-3.15-3.28-3.12-3.27-3.20

Rackspace Hosting Inc Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 1.03121.19151.05791.00340.98621.00911.13851.0541.09761.0135
GMI 0.97830.97190.9710.98541.0031.02981.05921.0571.0511.0268
AQI 1.22560.8950.84890.94720.98280.95860.96840.85470.83050.8324
SGI 1.31011.29591.27721.24961.22151.19361.17231.16321.16261.1693
DEPI 0.930.9050.92570.93110.95910.97620.98660.9720.97750.9721
SGAI 1.00351.0021.02370.96490.92220.87950.83130.8640.89480.9257
LVGI 0.81480.87250.81230.82610.7510.7580.77530.84820.96981.0048
TATA -0.1967-0.2008-0.2046-0.226-0.2426-0.2476-0.2395-0.247-0.2459-0.2358
M-score -2.96-3.01-3.16-3.29-3.35-3.36-3.20-3.40-3.41-3.47
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