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GuruFocus has detected 4 Warning Signs with Meritage Homes Corp $MTH.
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Meritage Homes Corp (NYSE:MTH)
Beneish M-Score
-1.72 (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.

Meritage Homes Corp has a M-score of -1.72 signals that the company is a manipulator.

MTH' s Beneish M-Score Range Over the Past 10 Years
Min: -8.24   Max: 15.98
Current: -1.72

-8.24
15.98

During the past 13 years, the highest Beneish M-Score of Meritage Homes Corp was 15.98. The lowest was -8.24. And the median was -1.28.


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 Meritage Homes 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 * 1.2154+0.528 * 1.0848+0.404 * 1.0324+0.892 * 1.1729+0.115 * 0.8878
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9508+4.679 * 0.0727-0.327 * 0.9706
=-1.72

* 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 $86 Mil.
Revenue was 672.772 + 860.791 + 760.211 + 805.167 = $3,099 Mil.
Gross Profit was 108.384 + 136.086 + 137.83 + 143.867 = $526 Mil.
Total Current Assets was $172 Mil.
Total Assets was $2,957 Mil.
Property, Plant and Equipment(Net PPE) was $33 Mil.
Depreciation, Depletion and Amortization(DDA) was $16 Mil.
Selling, General & Admin. Expense(SGA) was $341 Mil.
Total Current Liabilities was $295 Mil.
Long-Term Debt was $1,171 Mil.
Net Income was 23.572 + 51.807 + 36.887 + 39.878 = $152 Mil.
Non Operating Income was 7.152 + 32.383 + 1.875 + 2.118 = $44 Mil.
Cash Flow from Operations was -84.766 + 44.943 + -37.726 + -28.802 = $-106 Mil.
Accounts Receivable was $60 Mil.
Revenue was 597.766 + 764.182 + 676.81 + 603.299 = $2,642 Mil.
Gross Profit was 102.55 + 133.355 + 131.845 + 118.885 = $487 Mil.
Total Current Assets was $233 Mil.
Total Assets was $2,715 Mil.
Property, Plant and Equipment(Net PPE) was $35 Mil.
Depreciation, Depletion and Amortization(DDA) was $14 Mil.
Selling, General & Admin. Expense(SGA) was $306 Mil.
Total Current Liabilities was $268 Mil.
Long-Term Debt was $1,119 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)
=(86.232 / 3098.941) / (60.491 / 2642.057)
=0.02782628 / 0.02289542
=1.2154

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)
=(486.635 / 2642.057) / (526.167 / 3098.941)
=0.18418793 / 0.16978929
=1.0848

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 - (171.921 + 32.7) / 2956.547) / (1 - (232.666 + 34.544) / 2714.513)
=0.93079055 / 0.90156245
=1.0324

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
=3098.941 / 2642.057
=1.1729

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))
=(14.432 / (14.432 + 34.544)) / (16.246 / (16.246 + 32.7))
=0.29467494 / 0.33191681
=0.8878

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)
=(341.042 / 3098.941) / (305.8 / 2642.057)
=0.11005114 / 0.11574315
=0.9508

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)
=((1171.426 + 295.47) / 2956.547) / ((1119.393 + 268.172) / 2714.513)
=0.49615176 / 0.51116535
=0.9706

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
=(152.144 - 43.528 - -106.351) / 2956.547
=0.0727

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.

Meritage Homes Corp has a M-score of -1.72 signals that the company is likely to 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.

Meritage Homes Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.20520.85195.83670.1860.77770.97871.26231.23080.85451.0408
GMI 36.9851-0.2297-5.80540.02341.04650.89750.84321.08951.10271.0878
AQI 0.96490.80250.051817.29891.10991.12170.99791.16360.94681.0581
SGI 0.67710.64990.63710.97050.92161.38851.5221.18311.18131.1798
DEPI 1.00830.894132.29310.03581.01711.01331.10521.17530.89320.9092
SGAI 1.28210.78191.29081.01881.10510.84410.87951.01220.97590.9534
LVGI 1.10251.04381.00320.98511.01190.93091.03150.89021.02030.964
TATA -0.0739-0.335-0.2143-0.02490.04220.21480.10170.14090.04060.0731
M-score 15.98-5.210.212.59-2.51-1.10-1.36-1.28-2.24-1.86

Meritage Homes Corp Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.23080.95121.05630.86610.85450.84710.88681.08671.04081.2154
GMI 1.08951.16871.20661.17441.10271.07071.06561.07241.08781.0848
AQI 1.16361.14821.05640.95270.94680.97781.04361.05441.05811.0324
SGI 1.18311.19391.20751.22531.18131.16091.20051.17881.17981.1729
DEPI 1.17531.04170.94870.89120.89320.90560.91210.91520.90920.8878
SGAI 1.01221.04131.04161.00280.97590.94080.90740.92630.95340.9508
LVGI 0.89020.96031.02541.02941.02031.00940.94710.95790.9640.9706
TATA 0.14090.09560.08570.05360.04060.0560.05450.0740.07310.0727
M-score -1.28-1.75-1.73-2.10-2.24-2.19-2.07-1.82-1.86-1.72
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