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GuruFocus has detected 2 Warning Signs with RCM Technologies Inc $RCMT.
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RCM Technologies Inc (NAS:RCMT)
Beneish M-Score
-3.20 (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.

RCM Technologies Inc has a M-score of -3.20 suggests that the company is not a manipulator.

RCMT' s Beneish M-Score Range Over the Past 10 Years
Min: -5.35   Max: -0.6
Current: -3.2

-5.35
-0.6

During the past 13 years, the highest Beneish M-Score of RCM Technologies Inc was -0.60. The lowest was -5.35. And the median was -2.52.


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 RCM Technologies 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 * 0.8428+0.528 * 1.0481+0.404 * 1.2224+0.892 * 0.95+0.115 * 0.8525
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0224+4.679 * -0.1375-0.327 * 0.9299
=-3.20

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $44.0 Mil.
Revenue was 44.198 + 39.695 + 45.379 + 47.176 = $176.4 Mil.
Gross Profit was 12.106 + 10.144 + 12.104 + 12.676 = $47.0 Mil.
Total Current Assets was $53.1 Mil.
Total Assets was $69.8 Mil.
Property, Plant and Equipment(Net PPE) was $4.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.6 Mil.
Selling, General & Admin. Expense(SGA) was $41.3 Mil.
Total Current Liabilities was $23.7 Mil.
Long-Term Debt was $14.3 Mil.
Net Income was -0.216 + 0.11 + 0.863 + 1.001 = $1.8 Mil.
Non Operating Income was -0.283 + -0.014 + 0.011 + 0.012 = $-0.3 Mil.
Cash Flow from Operations was -0.493 + 4.447 + 6.627 + 1.054 = $11.6 Mil.
Accounts Receivable was $54.9 Mil.
Revenue was 47.407 + 45.077 + 45.286 + 47.966 = $185.7 Mil.
Gross Profit was 13.69 + 12.802 + 12.09 + 13.303 = $51.9 Mil.
Total Current Assets was $64.5 Mil.
Total Assets was $81.3 Mil.
Property, Plant and Equipment(Net PPE) was $4.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.5 Mil.
Selling, General & Admin. Expense(SGA) was $42.6 Mil.
Total Current Liabilities was $26.6 Mil.
Long-Term Debt was $21.0 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)
=(43.973 / 176.448) / (54.92 / 185.736)
=0.24921223 / 0.2956885
=0.8428

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)
=(51.885 / 185.736) / (47.03 / 176.448)
=0.27934811 / 0.26653745
=1.0481

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 - (53.071 + 4.052) / 69.831) / (1 - (64.529 + 4.698) / 81.336)
=0.18198221 / 0.14887627
=1.2224

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
=176.448 / 185.736
=0.95

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))
=(1.467 / (1.467 + 4.698)) / (1.569 / (1.569 + 4.052))
=0.2379562 / 0.27913183
=0.8525

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)
=(41.346 / 176.448) / (42.567 / 185.736)
=0.23432399 / 0.22918013
=1.0224

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)
=((14.311 + 23.713) / 69.831) / ((21 + 26.629) / 81.336)
=0.54451461 / 0.58558326
=0.9299

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
=(1.758 - -0.274 - 11.635) / 69.831
=-0.1375

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.

RCM Technologies Inc has a M-score of -3.20 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 local exchange's currency.

RCM Technologies Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.89031.25550.96650.98760.73821.29291.24891.00660.96880.8428
GMI 1.01140.95890.9940.91021.00641.041.04850.97370.9551.0481
AQI 1.00540.361.04940.87950.90131.20610.91420.98011.141.2224
SGI 1.06090.9770.82060.94350.88761.01391.17121.13460.95850.95
DEPI 1.00160.94851.01950.89260.94790.75581.26371.22161.12350.8525
SGAI 0.94661.15081.06010.93741.02451.0041.04770.86571.1111.0224
LVGI 0.96761.85040.59430.89521.04611.78770.96451.74861.17130.9299
TATA -0.0247-0.443-0.2495-0.0912-0.0249-0.00570.06580.0285-0.0771-0.1375
M-score -2.61-4.93-3.70-3.03-3.00-2.41-1.77-2.44-2.93-3.20

RCM Technologies Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.09091.006611.16691.23170.83920.96881.12390.6911.12850.8428
GMI 0.99940.97370.94590.93770.96020.9550.98510.99081.01461.0481
AQI 0.96050.98011.02361.08881.22041.141.22621.32961.19621.2224
SGI 1.17511.13461.08451.020.9860.95850.95740.97930.95750.95
DEPI 1.38481.22161.20760.99981.12531.12351.04241.0130.8470.8525
SGAI 1.05650.86570.89670.96550.97791.1111.08931.03291.01671.0224
LVGI 0.9371.74861.68741.53131.59661.17131.12381.06181.06940.9299
TATA 0.07270.02850.05550.0902-0.0708-0.0771-0.1659-0.2356-0.1828-0.1375
M-score -1.86-2.447.01-1.99-3.08-2.93-3.15-3.78-3.21-3.20
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