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GuruFocus has detected 3 Warning Signs with IRIDEX Corp $IRIX.
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IRIDEX Corp (NAS:IRIX)
Beneish M-Score
-3.97 (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.

IRIDEX Corp has a M-score of -3.97 suggests that the company is not a manipulator.

IRIX' s Beneish M-Score Range Over the Past 10 Years
Min: -10000000   Max: 10000000
Current: -3.97

-10000000
10000000

During the past 13 years, the highest Beneish M-Score of IRIDEX Corp was 10000000.00. The lowest was -10000000.00. And the median was -2.33.


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 IRIDEX 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 * 0.9149+0.528 * 1.0337+0.404 * 0.0662+0.892 * 1.0424+0.115 * 1.138
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.2535+4.679 * -0.2384-0.327 * 0.8498
=-3.97

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

This Year (Mar17) TTM:Last Year (Mar16) TTM:
Accounts Receivable was $8.87 Mil.
Revenue was 10.483 + 12.53 + 9.789 + 11.908 = $44.71 Mil.
Gross Profit was 4.465 + 5.563 + 4.245 + 5.734 = $20.01 Mil.
Total Current Assets was $45.02 Mil.
Total Assets was $47.43 Mil.
Property, Plant and Equipment(Net PPE) was $1.67 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.71 Mil.
Selling, General & Admin. Expense(SGA) was $18.96 Mil.
Total Current Liabilities was $7.17 Mil.
Long-Term Debt was $0.00 Mil.
Net Income was -1.866 + -10.815 + -0.671 + -0.328 = $-13.68 Mil.
Non Operating Income was -0.002 + -0.008 + -0.051 + -0.021 = $-0.08 Mil.
Cash Flow from Operations was -1.622 + -0.339 + -1.633 + 1.302 = $-2.29 Mil.
Accounts Receivable was $9.30 Mil.
Revenue was 11.931 + 12.113 + 9.815 + 9.033 = $42.89 Mil.
Gross Profit was 5.297 + 5.485 + 4.841 + 4.217 = $19.84 Mil.
Total Current Assets was $31.38 Mil.
Total Assets was $42.36 Mil.
Property, Plant and Equipment(Net PPE) was $1.06 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.54 Mil.
Selling, General & Admin. Expense(SGA) was $14.51 Mil.
Total Current Liabilities was $7.54 Mil.
Long-Term Debt was $0.00 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)
=(8.866 / 44.71) / (9.297 / 42.892)
=0.19830016 / 0.21675371
=0.9149

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)
=(19.84 / 42.892) / (20.007 / 44.71)
=0.46255712 / 0.44748378
=1.0337

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 - (45.02 + 1.672) / 47.428) / (1 - (31.378 + 1.055) / 42.363)
=0.01551826 / 0.23440266
=0.0662

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
=44.71 / 42.892
=1.0424

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))
=(0.544 / (0.544 + 1.055)) / (0.713 / (0.713 + 1.672))
=0.34021263 / 0.29895178
=1.138

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)
=(18.96 / 44.71) / (14.511 / 42.892)
=0.4240662 / 0.33831484
=1.2535

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 + 7.169) / 47.428) / ((0 + 7.535) / 42.363)
=0.15115544 / 0.17786748
=0.8498

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
=(-13.68 - -0.082 - -2.292) / 47.428
=-0.2384

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.

IRIDEX Corp has a M-score of -3.97 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.

IRIDEX Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.94821.0571.37070.72940.99110.96681.18571.01471.14150.9771
GMI 1.19771.07840.808611.02081.01760.99410.97141.04631.0584
AQI 6.7050.29540.86471.64780.83870.65910.72735.66561.21490.065
SGI 1.54670.87390.665811.02631.02111.13041.11860.97531.1054
DEPI 0.4740.88332.09520.80840.84111.18880.98921.30451.13271.081
SGAI 10.7310.947811.01411.07160.87930.99541.04421.1218
LVGI 2.98980.97830.79410.67890.88080.79430.99270.771.05560.9891
TATA -0.5198-0.2860.0392-0.054-0.01380.06240.05450.17410.0254-0.2384
M-score -2.77-4.08-2.21-2.64-2.57-2.25-2.030.43-2.15-3.88

IRIDEX Corp Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.01471.09170.99181.02611.14151.16971.05260.92780.97710.9149
GMI 0.97140.97340.99461.00881.04631.08691.06191.08341.05841.0337
AQI 5.66565.60765.89616.15871.21491.23421.14071.15320.0650.0662
SGI 1.11861.09121.01660.99490.97530.9911.09691.10431.10541.0424
DEPI 1.30451.51111.27471.1621.13270.87690.94461.08421.0811.138
SGAI 0.99541.01751.04331.04351.04420.99940.98861.02921.12181.2535
LVGI 0.770.92760.89180.87921.05561.04171.15561.00470.98910.8498
TATA 0.17410.16510.16930.21210.02540.0239-0.0045-0.0047-0.2384-0.2384
M-score 0.430.390.350.67-2.15-2.11-2.33-2.37-3.88-3.97
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