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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 6 years, the highest Beneish M-Score of Rose Rock Midstream LP was 21.84. The lowest was -2.91. And the median was -1.93.
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 Rose Rock Midstream LP 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 * 1.0907||+||0.528 * 0.7115||+||0.404 * 1.2179||+||0.892 * 0.7649||+||0.115 * 1.2126|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.3725||+||4.679 * -0.04||-||0.327 * 1.0456|
|This Year (Sep15) TTM:||Last Year (Sep14) TTM:|
|Accounts Receivable was $242.9 Mil.|
Revenue was 241.086 + 223.303 + 134.693 + 329.118 = $928.2 Mil.
Gross Profit was 26.761 + 26.514 + 17.505 + 17.675 = $88.5 Mil.
Total Current Assets was $348.6 Mil.
Total Assets was $1,273.5 Mil.
Property, Plant and Equipment(Net PPE) was $425.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $40.3 Mil.
Selling, General & Admin. Expense(SGA) was $20.7 Mil.
Total Current Liabilities was $270.5 Mil.
Long-Term Debt was $744.5 Mil.
Net Income was 16.421 + 17.068 + 14.6 + 14.743 = $62.8 Mil.
Non Operating Income was 0.009 + 0.005 + 0 + -0.001 = $0.0 Mil.
Cash Flow from Operations was 32.431 + 26.941 + -7.07 + 61.42 = $113.7 Mil.
|Accounts Receivable was $291.2 Mil.
Revenue was 376.856 + 292.156 + 292.514 + 252.041 = $1,213.6 Mil.
Gross Profit was 21.08 + 18.973 + 22.762 + 19.467 = $82.3 Mil.
Total Current Assets was $389.7 Mil.
Total Assets was $1,065.3 Mil.
Property, Plant and Equipment(Net PPE) was $332.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $39.0 Mil.
Selling, General & Admin. Expense(SGA) was $19.7 Mil.
Total Current Liabilities was $338.9 Mil.
Long-Term Debt was $473.1 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)|
|=||(242.91 / 928.2)||/||(291.177 / 1213.567)|
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)|
|=||(26.514 / 1213.567)||/||(26.761 / 928.2)|
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 - (348.645 + 425.82) / 1273.495)||/||(1 - (389.654 + 332.902) / 1065.311)|
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))|
|=||(38.991 / (38.991 + 332.902))||/||(40.304 / (40.304 + 425.82))|
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)|
|=||(20.689 / 928.2)||/||(19.708 / 1213.567)|
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)|
|=||((744.468 + 270.452) / 1273.495)||/||((473.058 + 338.923) / 1065.311)|
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|
|=||(62.832 - 0.013||-||113.722)||/||1273.495|
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.
Rose Rock Midstream LP has a M-score of -2.91 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
Rose Rock Midstream LP Annual Data
Rose Rock Midstream LP Quarterly Data