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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 12 years, the highest Beneish M-Score of Sears Holdings Corp was -2.45. The lowest was -3.30. And the median was -2.72.
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 Sears Holdings 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 * 0.8998||+||0.528 * 1.0558||+||0.404 * 1.0248||+||0.892 * 0.8621||+||0.115 * 1.0345|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0161||+||4.679 * -0.0226||-||0.327 * 1.1525|
|This Year (Jan15) TTM:||Last Year (Jan14) TTM:|
|Accounts Receivable was $429 Mil.|
Revenue was 8099 + 7207 + 8013 + 7879 = $31,198 Mil.
Gross Profit was 1978 + 1601 + 1742 + 1828 = $7,149 Mil.
Total Current Assets was $5,863 Mil.
Total Assets was $13,209 Mil.
Property, Plant and Equipment(Net PPE) was $4,449 Mil.
Depreciation, Depletion and Amortization(DDA) was $581 Mil.
Selling, General & Admin. Expense(SGA) was $8,220 Mil.
Total Current Liabilities was $6,076 Mil.
Long-Term Debt was $3,110 Mil.
Net Income was -159 + -548 + -573 + -402 = $-1,682 Mil.
Non Operating Income was 0 + 2 + 5 + -3 = $4 Mil.
Cash Flow from Operations was 555 + -1195 + -187 + -560 = $-1,387 Mil.
|Accounts Receivable was $553 Mil.
Revenue was 10593 + 8272 + 8871 + 8452 = $36,188 Mil.
Gross Profit was 2482 + 1931 + 2186 + 2156 = $8,755 Mil.
Total Current Assets was $8,959 Mil.
Total Assets was $18,261 Mil.
Property, Plant and Equipment(Net PPE) was $5,394 Mil.
Depreciation, Depletion and Amortization(DDA) was $732 Mil.
Selling, General & Admin. Expense(SGA) was $9,384 Mil.
Total Current Liabilities was $8,185 Mil.
Long-Term Debt was $2,834 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)|
|=||(429 / 31198)||/||(553 / 36188)|
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)|
|=||(1601 / 36188)||/||(1978 / 31198)|
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 - (5863 + 4449) / 13209)||/||(1 - (8959 + 5394) / 18261)|
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))|
|=||(732 / (732 + 5394))||/||(581 / (581 + 4449))|
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)|
|=||(8220 / 31198)||/||(9384 / 36188)|
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)|
|=||((3110 + 6076) / 13209)||/||((2834 + 8185) / 18261)|
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|
|=||(-1682 - 4||-||-1387)||/||13209|
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.
Sears Holdings Corp has a M-score of -2.81 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
Sears Holdings Corp Annual Data
Sears Holdings Corp Quarterly Data