Market Cap : 639.5 M | Enterprise Value : 1.22 B | P/E (TTM) : | P/B : 2.23 |
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The zones of discrimination for M-Score is as such:
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.
Good Sign:
Beneish M-Score -3.07 no higher than -1.78, which implies that the company is unlikely to be a manipulator.
During the past 13 years, the highest Beneish M-Score of Interface was -1.98. The lowest was -3.27. And the median was -2.57.
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
* The bar in red indicates where Interface's Beneish M-Score falls into.
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 Interface 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 * 0.8629 | + | 0.528 * 1.0114 | + | 0.404 * 0.8543 | + | 0.892 * 0.8696 | + | 0.115 * 1.1115 | |
- | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI | |||||||
- | 0.172 * 1.0242 | + | 4.679 * -0.0637 | - | 0.327 * 1.0239 | |||||||
= | -3.07 |
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
This Year (Sep20) TTM: | Last Year (Sep19) TTM: |
Accounts Receivable was $133 Mil. Revenue was 278.642 + 259.504 + 288.169 + 339.482 = $1,166 Mil. Gross Profit was 102.162 + 97.294 + 114.311 + 130.458 = $444 Mil. Total Current Assets was $515 Mil. Total Assets was $1,306 Mil. Property, Plant and Equipment(Net PPE) was $446 Mil. Depreciation, Depletion and Amortization(DDA) was $50 Mil. Selling, General, & Admin. Expense(SGA) was $346 Mil. Total Current Liabilities was $245 Mil. Long-Term Debt & Capital Lease Obligation was $638 Mil. Net Income was 5.913 + 4.709 + -102.167 + 16.432 = $-75 Mil. Non Operating Income was -1.04 + -4.982 + -121.631 + -13.373 = $-141 Mil. Cash Flow from Operations was 64.841 + 48.144 + -15.717 + 51.864 = $149 Mil. |
Accounts Receivable was $177 Mil. Revenue was 348.352 + 357.507 + 297.688 + 337.059 = $1,341 Mil. Gross Profit was 137.744 + 140.73 + 116.522 + 121.682 = $517 Mil. Total Current Assets was $565 Mil. Total Assets was $1,425 Mil. Property, Plant and Equipment(Net PPE) was $420 Mil. Depreciation, Depletion and Amortization(DDA) was $53 Mil. Selling, General, & Admin. Expense(SGA) was $389 Mil. Total Current Liabilities was $255 Mil. Long-Term Debt & Capital Lease Obligation was $686 Mil. |
1. DSRI = Days Sales in Receivables Index
Measured as the ratio of Revenue in Accounts Receivable 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) |
= | (132.592 / 1165.797) | / | (176.705 / 1340.606) | |
= | 0.11373507 | / | 0.13180979 | |
= | 0.8629 |
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) | |
= | (516.678 / 1340.606) | / | (444.225 / 1165.797) | |
= | 0.3854063 | / | 0.38104833 | |
= | 1.0114 |
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 - (515.046 + 446.407) / 1305.775) | / | (1 - (564.789 + 420.023) / 1424.537) | |
= | 0.26369168 | / | 0.30867924 | |
= | 0.8543 |
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 | |
= | 1165.797 | / | 1340.606 | |
= | 0.8696 |
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)) |
= | (53.149 / (53.149 + 420.023)) | / | (50.186 / (50.186 + 446.407)) | |
= | 0.11232491 | / | 0.10106063 | |
= | 1.1115 |
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) |
= | (346.137 / 1165.797) | / | (388.619 / 1340.606) | |
= | 0.29691018 | / | 0.28988308 | |
= | 1.0242 |
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) |
= | ((638.402 + 244.807) / 1305.775) | / | ((686.061 + 254.972) / 1424.537) | |
= | 0.67638682 | / | 0.66058867 | |
= | 1.0239 |
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 | |
= | (-75.113 - -141.026 | - | 149.132) | / | 1305.775 | |
= | -0.0637 |
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.
Interface has a M-score of -3.07 suggests that the company is unlikely to be a manipulator.
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