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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 13 years, the highest Beneish M-Score of Seagate Technology PLC was 0.30. The lowest was -5.75. And the median was -2.68.
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 Seagate Technology PLC 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 * 1.1149||+||0.528 * 0.9869||+||0.404 * 1.1313||+||0.892 * 1.0158||+||0.115 * 1.0526|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0778||+||4.679 * -0.0987||-||0.327 * 0.9205|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $1,829 Mil.|
Revenue was 3696 + 3785 + 3301 + 3406 = $14,188 Mil.
Gross Profit was 1027 + 1051 + 925 + 959 = $3,962 Mil.
Total Current Assets was $6,632 Mil.
Total Assets was $10,814 Mil.
Property, Plant and Equipment(Net PPE) was $2,155 Mil.
Depreciation, Depletion and Amortization(DDA) was $848 Mil.
Selling, General & Admin. Expense(SGA) was $785 Mil.
Total Current Liabilities was $2,819 Mil.
Long-Term Debt was $3,932 Mil.
Net Income was 933 + 381 + 320 + 395 = $2,029 Mil.
Non Operating Income was 122 + -11 + -77 + -3 = $31 Mil.
Cash Flow from Operations was 1443 + 602 + 577 + 443 = $3,065 Mil.
|Accounts Receivable was $1,615 Mil.
Revenue was 3528 + 3489 + 3424 + 3526 = $13,967 Mil.
Gross Profit was 987 + 975 + 939 + 948 = $3,849 Mil.
Total Current Assets was $5,289 Mil.
Total Assets was $8,890 Mil.
Property, Plant and Equipment(Net PPE) was $2,128 Mil.
Depreciation, Depletion and Amortization(DDA) was $900 Mil.
Selling, General & Admin. Expense(SGA) was $717 Mil.
Total Current Liabilities was $2,457 Mil.
Long-Term Debt was $3,572 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)|
|=||(1829 / 14188)||/||(1615 / 13967)|
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)|
|=||(1051 / 13967)||/||(1027 / 14188)|
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 - (6632 + 2155) / 10814)||/||(1 - (5289 + 2128) / 8890)|
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))|
|=||(900 / (900 + 2128))||/||(848 / (848 + 2155))|
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)|
|=||(785 / 14188)||/||(717 / 13967)|
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)|
|=||((3932 + 2819) / 10814)||/||((3572 + 2457) / 8890)|
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|
|=||(2029 - 31||-||3065)||/||10814|
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.
Seagate Technology PLC has a M-score of -2.76 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
Seagate Technology PLC Annual Data
Seagate Technology PLC Quarterly Data