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GuruFocus has detected 3 Warning Signs with H&R Block Inc $HRB.
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H&R Block Inc (NYSE:HRB)
Beneish M-Score
-2.75 (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.

H&R Block Inc has a M-score of -2.75 suggests that the company is not a manipulator.

HRB' s Beneish M-Score Range Over the Past 10 Years
Min: -4.23   Max: -0.93
Current: -2.75

-4.23
-0.93

During the past 13 years, the highest Beneish M-Score of H&R Block Inc was -0.93. The lowest was -4.23. And the median was -2.74.


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 H&R Block 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 * 1.0637+0.528 * 0.9712+0.404 * 0.8596+0.892 * 0.9994+0.115 * 0.8937
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9278+4.679 * -0.0533-0.327 * 1.0156
=-2.75

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

This Year (Apr17) TTM:Last Year (Apr16) TTM:
Accounts Receivable was $163 Mil.
Revenue was 2327.915 + 451.882 + 131.332 + 125.185 = $3,036 Mil.
Gross Profit was 1509.103 + 63.105 + -94.37 + -85.901 = $1,392 Mil.
Total Current Assets was $1,346 Mil.
Total Assets was $2,694 Mil.
Property, Plant and Equipment(Net PPE) was $264 Mil.
Depreciation, Depletion and Amortization(DDA) was $125 Mil.
Selling, General & Admin. Expense(SGA) was $614 Mil.
Total Current Liabilities was $939 Mil.
Long-Term Debt was $1,493 Mil.
Net Income was 783.352 + -104.514 + -146.22 + -123.673 = $409 Mil.
Non Operating Income was -2.39 + 0.083 + 2.121 + 2.61 = $2 Mil.
Cash Flow from Operations was 1926.01 + -650.12 + -250.122 + -475.675 = $550 Mil.
Accounts Receivable was $153 Mil.
Revenue was 2297.477 + 474.543 + 128.415 + 137.718 = $3,038 Mil.
Gross Profit was 1444.347 + 82.03 + -97.986 + -75.79 = $1,353 Mil.
Total Current Assets was $1,221 Mil.
Total Assets was $2,847 Mil.
Property, Plant and Equipment(Net PPE) was $294 Mil.
Depreciation, Depletion and Amortization(DDA) was $118 Mil.
Selling, General & Admin. Expense(SGA) was $662 Mil.
Total Current Liabilities was $1,040 Mil.
Long-Term Debt was $1,491 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)
=(162.775 / 3036.314) / (153.116 / 3038.153)
=0.05360941 / 0.05039773
=1.0637

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)
=(1352.601 / 3038.153) / (1391.937 / 3036.314)
=0.44520503 / 0.45842986
=0.9712

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 - (1346.039 + 263.827) / 2694.108) / (1 - (1220.601 + 293.565) / 2847.225)
=0.40244935 / 0.46819587
=0.8596

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
=3036.314 / 3038.153
=0.9994

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))
=(118.156 / (118.156 + 293.565)) / (124.79 / (124.79 + 263.827))
=0.28698075 / 0.32111308
=0.8937

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)
=(613.574 / 3036.314) / (661.718 / 3038.153)
=0.20207857 / 0.21780272
=0.9278

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)
=((1493.017 + 939.28) / 2694.108) / ((1491.375 + 1039.605) / 2847.225)
=0.9028209 / 0.88892869
=1.0156

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
=(408.945 - 2.424 - 550.093) / 2694.108
=-0.0533

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.

H&R Block Inc has a M-score of -2.75 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.

H&R Block Inc Annual Data

Apr08Apr09Apr10Apr11Apr12Apr13Apr14Apr15Apr16Apr17
DSRI 0.54130.89020.86110.92381.0637
GMI 1.05630.99541.01091.05660.9712
AQI 1.18760.68181.02161.68760.8596
SGI 1.02091.04071.0180.98680.9994
DEPI 1.147400.51180.46490.8937
SGAI 0.93850.99980.97351.10730.9278
LVGI 0.96820.93390.87891.6841.0156
TATA -0.0756-0.0678-0.0303-0.053-0.0533
M-score -3.09-3.09-2.73-2.81-2.75

H&R Block Inc Quarterly Data

Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17Apr17
DSRI 0.91470.86110.82940.86681.17190.92381.02121.12311.00731.0637
GMI 0.84361.01091.03161.02711.11571.05661.05021.04251.03730.9712
AQI 0.61151.02161.01951.29751.60781.68761.7460.94410.89350.8596
SGI 1.2551.0181.01721.0150.91070.98680.98150.98440.98810.9994
DEPI 0.40460.51180.52250.59010.49910.46490.50730.53970.77060.8937
SGAI 0.83470.97350.97481.03821.16071.10731.11941.01650.97710.9278
LVGI 0.93320.87890.82851.76591.64621.6842.08271.27711.09121.0156
TATA -0.0172-0.0303-0.0355-0.0818-0.0108-0.053-0.0391-0.0292-0.1012-0.0533
M-score -2.67-2.73-2.76-3.14-2.44-2.81-2.76-2.66-3.03-2.75
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