Tyler Technologies 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 Tyler Technologies 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 * 0.9654 | + | 0.528 * 0.9696 | + | 0.404 * 0.8375 | + | 0.892 * 1.0795 | + | 0.115 * 0.9131 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.0198 | + | 4.679 * -0.0636 | - | 0.327 * 0.9129 |
| = | -2.81 |
* 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 $363 Mil.
Revenue was 285.746 + 271.091 + 276.541 + 288.837 = $1,122 Mil.
Gross Profit was 143.509 + 131.203 + 129.131 + 142.275 = $546 Mil.
Total Current Assets was $991 Mil.
Total Assets was $2,492 Mil.
Property, Plant and Equipment(Net PPE) was $186 Mil.
Depreciation, Depletion and Amortization(DDA) was $81 Mil.
Selling, General, & Admin. Expense(SGA) was $267 Mil.
Total Current Liabilities was $535 Mil.
Long-Term Debt & Capital Lease Obligation was $13 Mil.
Net Income was 39.284 + 53.892 + 47.55 + 46.79 = $188 Mil.
Non Operating Income was 0.28 + 0.47 + 0 + 2.633 = $3 Mil.
Cash Flow from Operations was 169.808 + 39.814 + 56.706 + 76.193 = $343 Mil.
|
Accounts Receivable was $348 Mil.
Revenue was 275.4 + 275.124 + 247.066 + 241.981 = $1,040 Mil.
Gross Profit was 130.717 + 127.86 + 116.048 + 115.871 = $490 Mil.
Total Current Assets was $570 Mil.
Total Assets was $2,055 Mil.
Property, Plant and Equipment(Net PPE) was $190 Mil.
Depreciation, Depletion and Amortization(DDA) was $73 Mil.
Selling, General, & Admin. Expense(SGA) was $243 Mil.
Total Current Liabilities was $477 Mil.
Long-Term Debt & Capital Lease Obligation was $18 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) |
| = | (362.667 / 1122.215) | / | (347.982 / 1039.571) |
| = | 0.32317069 | / | 0.33473616 |
| | = | 0.9654 |
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) |
| = | (490.496 / 1039.571) | / | (546.118 / 1122.215) |
| = | 0.4718254 | / | 0.48664293 |
| | = | 0.9696 |
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 - (990.599 + 186.154) / 2492.163) | / | (1 - (569.806 + 190.122) / 2055.089) |
| = | 0.52781861 | / | 0.63022137 |
| | = | 0.8375 |
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 |
| = | 1122.215 | / | 1039.571 |
| | = | 1.0795 |
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)) |
| = | (72.679 / (72.679 + 190.122)) | / | (80.871 / (80.871 + 186.154)) |
| = | 0.27655526 | / | 0.30285928 |
| | = | 0.9131 |
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) |
| = | (267.09 / 1122.215) | / | (242.615 / 1039.571) |
| = | 0.23800252 | / | 0.23337992 |
| | = | 1.0198 |
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) |
| = | ((12.87 + 535.045) / 2492.163) | / | ((18.134 + 476.814) / 2055.089) |
| = | 0.2198552 | / | 0.24084018 |
| | = | 0.9129 |
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 |
| = | (187.516 - 3.383 | - | 342.521) | / | 2492.163 |
| | = | -0.0636 |
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.
Tyler Technologies has a M-score of -2.81 suggests that the company is unlikely to be a manipulator.
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