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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 Ulta Salon Cosmetics & Fragrance Inc was -2.28. The lowest was -3.32. And the median was -2.76.
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 Ulta Salon Cosmetics & Fragrance 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 * 1.0237||+||0.528 * 0.9941||+||0.404 * 1.2801||+||0.892 * 1.2106||+||0.115 * 0.9523|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9985||+||4.679 * -0.0256||-||0.327 * 0.9795|
|This Year (Jan16) TTM:||Last Year (Jan15) TTM:|
|Accounts Receivable was $65 Mil.|
Revenue was 1268.295 + 910.7 + 876.999 + 868.122 = $3,924 Mil.
Gross Profit was 439.036 + 335.638 + 306.475 + 303.184 = $1,384 Mil.
Total Current Assets was $1,375 Mil.
Total Assets was $2,231 Mil.
Property, Plant and Equipment(Net PPE) was $848 Mil.
Depreciation, Depletion and Amortization(DDA) was $165 Mil.
Selling, General & Admin. Expense(SGA) was $878 Mil.
Total Current Liabilities was $396 Mil.
Long-Term Debt was $0 Mil.
Net Income was 107.823 + 71.07 + 74.169 + 66.946 = $320 Mil.
Non Operating Income was 0.546 + 0 + 0 + 0.622 = $1 Mil.
Cash Flow from Operations was 226.901 + 23.277 + 57.404 + 68.292 = $376 Mil.
|Accounts Receivable was $52 Mil.
Revenue was 1047.641 + 745.722 + 734.236 + 713.77 = $3,241 Mil.
Gross Profit was 349.737 + 281.755 + 259.342 + 245.953 = $1,137 Mil.
Total Current Assets was $1,260 Mil.
Total Assets was $1,983 Mil.
Property, Plant and Equipment(Net PPE) was $717 Mil.
Depreciation, Depletion and Amortization(DDA) was $132 Mil.
Selling, General & Admin. Expense(SGA) was $726 Mil.
Total Current Liabilities was $360 Mil.
Long-Term Debt was $0 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)|
|=||(64.992 / 3924.116)||/||(52.44 / 3241.369)|
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)|
|=||(335.638 / 3241.369)||/||(439.036 / 3924.116)|
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 - (1375.173 + 847.6) / 2230.918)||/||(1 - (1260.355 + 717.159) / 1983.17)|
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))|
|=||(131.764 / (131.764 + 717.159))||/||(165.049 / (165.049 + 847.6))|
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)|
|=||(878.036 / 3924.116)||/||(726.372 / 3241.369)|
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)|
|=||((0 + 396.227) / 2230.918)||/||((0 + 359.594) / 1983.17)|
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|
|=||(320.008 - 1.168||-||375.874)||/||2230.918|
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.
Ulta Salon Cosmetics & Fragrance Inc has a M-score of -2.28 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
Ulta Salon Cosmetics & Fragrance Inc Annual Data
Ulta Salon Cosmetics & Fragrance Inc Quarterly Data