Stellar Bancorp Beneish M-Score Calculation
The M-score was created by Professor Messod Beneish. Instead of measuring the bankruptcy risk (Altman Z-Score) or business trend (Piotroski 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 Stellar Bancorp 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 * 0.663 | + | 0.528 * 1 | + | 0.404 * 1.0405 | + | 0.892 * 1.4914 | + | 0.115 * 0.449 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.0017 | + | 4.679 * -0.003543 | - | 0.327 * 0.9985 |
| = | -2.42 |
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD.
* For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
| This Year (Dec23) TTM: | Last Year (Dec22) TTM: |
Total Receivables was $44.2 Mil.
Revenue was 112.816 + 111.416 + 113.764 + 123.325 = $461.3 Mil.
Gross Profit was 112.816 + 111.416 + 113.764 + 123.325 = $461.3 Mil.
Total Current Assets was $1,839.2 Mil.
Total Assets was $10,647.1 Mil.
Property, Plant and Equipment(Net PPE) was $118.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $34.5 Mil.
Selling, General, & Admin. Expense(SGA) was $171.7 Mil.
Total Current Liabilities was $11.3 Mil.
Long-Term Debt & Capital Lease Obligation was $159.8 Mil.
Net Income was 27.266 + 30.908 + 35.175 + 37.148 = $130.5 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.0 Mil.
Cash Flow from Operations was 31.33 + 38.899 + 48.971 + 49.017 = $168.2 Mil.
|
Total Receivables was $44.7 Mil.
Revenue was 126.251 + 63.685 + 60.186 + 59.19 = $309.3 Mil.
Gross Profit was 126.251 + 63.685 + 60.186 + 59.19 = $309.3 Mil.
Total Current Assets was $2,224.0 Mil.
Total Assets was $10,900.4 Mil.
Property, Plant and Equipment(Net PPE) was $126.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $14.3 Mil.
Selling, General, & Admin. Expense(SGA) was $114.9 Mil.
Total Current Liabilities was $2.1 Mil.
Long-Term Debt & Capital Lease Obligation was $173.3 Mil.
|
1. DSRI = Days Sales in Receivables Index
Measured as the ratio of Revenue in Total 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) |
| = | (44.244 / 461.321) | / | (44.743 / 309.312) |
| = | 0.095907 | / | 0.144653 |
| | = | 0.663 |
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) |
| = | (309.312 / 309.312) | / | (461.321 / 461.321) |
| = | 1 | / | 1 |
| | = | 1 |
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 Property, Plant and Equipment to Total Assets.
| AQI | = | (1 - (CurrentAssets_t + PPE_t) / TotalAssets_t) | / | (1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1) |
| = | (1 - (1839.161 + 118.683) / 10647.139) | / | (1 - (2224.034 + 126.803) / 10900.437) |
| = | 0.816115 | / | 0.784336 |
| | = | 1.0405 |
4. SGI = Sales Growth Index
Ratio of Revenue 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 |
| = | 461.321 | / | 309.312 |
| | = | 1.4914 |
5. DEPI = Depreciation Index
Measured as the ratio of the rate of Depreciation, Depletion and Amortization 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)) |
| = | (14.254 / (14.254 + 126.803)) | / | (34.467 / (34.467 + 118.683)) |
| = | 0.101051 | / | 0.225054 |
| | = | 0.449 |
Note: If the Depreciation, Depletion and Amortization data is not available, we assume that the depreciation rate is constant and set the Depreciation Index to 1.
6. SGAI = Sales, General and Administrative expenses Index
The ratio of Selling, General, & Admin. Expense(SGA) to Sales 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) |
| = | (171.693 / 461.321) | / | (114.928 / 309.312) |
| = | 0.372177 | / | 0.37156 |
| | = | 1.0017 |
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 in leverage
| LVGI | = | ((LTD_t + CurrentLiabilities_t) / TotalAssets_t) | / | ((LTD_t-1 + CurrentLiabilities_t-1) / TotalAssets_t-1) |
| = | ((159.765 + 11.288) / 10647.139) | / | ((173.292 + 2.098) / 10900.437) |
| = | 0.016066 | / | 0.01609 |
| | = | 0.9985 |
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 |
| = | (130.497 - 0 | - | 168.217) | / | 10647.139 |
| | = | -0.003543 |
An M-Score of equal or less than -1.78 suggests that the company is unlikely to be a manipulator. An M-Score of greater than -1.78 signals that the company is likely to be a manipulator.
Stellar Bancorp has a M-score of -2.42 suggests that the company is unlikely to be a manipulator.
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