Switch to:
GuruFocus has detected 4 Warning Signs with Red Hat Inc $RHT.
More than 500,000 people have already joined GuruFocus to track the stocks they follow and exchange investment ideas.
Red Hat Inc (NYSE:RHT)
Beneish M-Score
-2.83 (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.

Red Hat Inc has a M-score of -2.83 suggests that the company is not a manipulator.

RHT' s Beneish M-Score Range Over the Past 10 Years
Min: -5.01   Max: -1.76
Current: -2.83

-5.01
-1.76

During the past 13 years, the highest Beneish M-Score of Red Hat Inc was -1.76. The lowest was -5.01. And the median was -2.84.


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 Red Hat Inc 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 * 1.118+0.528 * 0.9959+0.404 * 0.8915+0.892 * 1.1784+0.115 * 1.0356
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0108+4.679 * -0.12-0.327 * 1.0373
=-2.83

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

This Year (May17) TTM:Last Year (May16) TTM:
Accounts Receivable was $430 Mil.
Revenue was 676.796 + 628.84 + 615.26 + 599.805 = $2,521 Mil.
Gross Profit was 576.1 + 536.633 + 524.807 + 512.134 = $2,150 Mil.
Total Current Assets was $2,302 Mil.
Total Assets was $4,512 Mil.
Property, Plant and Equipment(Net PPE) was $195 Mil.
Depreciation, Depletion and Amortization(DDA) was $86 Mil.
Selling, General & Admin. Expense(SGA) was $1,302 Mil.
Total Current Liabilities was $1,791 Mil.
Long-Term Debt was $751 Mil.
Net Income was 73.19 + 65.803 + 67.943 + 58.772 = $266 Mil.
Non Operating Income was -0.586 + -0.304 + -1.392 + 0.084 = $-2 Mil.
Cash Flow from Operations was 257.872 + 318.259 + 136.359 + 96.802 = $809 Mil.
Accounts Receivable was $326 Mil.
Revenue was 567.899 + 543.502 + 523.58 + 504.148 = $2,139 Mil.
Gross Profit was 483.851 + 462.282 + 442.532 + 428.184 = $1,817 Mil.
Total Current Assets was $1,884 Mil.
Total Assets was $4,112 Mil.
Property, Plant and Equipment(Net PPE) was $168 Mil.
Depreciation, Depletion and Amortization(DDA) was $78 Mil.
Selling, General & Admin. Expense(SGA) was $1,093 Mil.
Total Current Liabilities was $1,504 Mil.
Long-Term Debt was $729 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)
=(429.908 / 2520.701) / (326.334 / 2139.129)
=0.17055097 / 0.15255461
=1.118

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)
=(1816.849 / 2139.129) / (2149.674 / 2520.701)
=0.84934055 / 0.85280801
=0.9959

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 - (2301.649 + 195.281) / 4512.436) / (1 - (1883.953 + 168.015) / 4112.281)
=0.44665586 / 0.50101464
=0.8915

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
=2520.701 / 2139.129
=1.1784

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))
=(78.242 / (78.242 + 168.015)) / (86.424 / (86.424 + 195.281))
=0.31772498 / 0.30678902
=1.0356

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)
=(1302.369 / 2520.701) / (1093.459 / 2139.129)
=0.51666937 / 0.5111702
=1.0108

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)
=((751.173 + 1791.38) / 4512.436) / ((729.307 + 1504.477) / 4112.281)
=0.56345464 / 0.54319829
=1.0373

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
=(265.708 - -2.198 - 809.292) / 4512.436
=-0.12

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.

Red Hat Inc has a M-score of -2.83 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.

Red Hat Inc Annual Data

Feb08Feb09Feb10Feb11Feb12Feb13Feb14Feb15Feb16Feb17
DSRI 1.10580.8120.94511.09031.10841.01231.03071.11310.94971.0598
GMI 0.99131.01010.98761.01570.99080.99221.00071.00130.99790.9954
AQI 0.95871.15110.93871.00361.1070.97980.94611.04241.11460.879
SGI 1.30551.24771.14661.21521.24621.17271.15491.16611.14681.1752
DEPI 1.14620.87240.95491.00411.08461.17161.02030.9760.98041.0092
SGAI 0.98950.97420.9850.96510.99111.03220.98591.02391.01061.017
LVGI 0.95660.54631.18841.02121.11291.01841.05491.45641.02091.0581
TATA -0.0898-0.1063-0.0956-0.084-0.0983-0.1122-0.1168-0.1202-0.1288-0.1164
M-score -2.52-2.72-2.94-2.59-2.61-2.84-2.89-2.93-2.96-2.89

Red Hat Inc Quarterly Data

Feb15May15Aug15Nov15Feb16May16Aug16Nov16Feb17May17
DSRI 1.11310.92530.93080.97770.94970.991.01550.9141.05981.118
GMI 1.00131.00071.00010.99850.99790.99880.99740.99560.99540.9959
AQI 1.04240.9720.99491.07071.11460.99630.99880.98650.8790.8915
SGI 1.16611.15771.1431.1431.14681.15831.17311.17931.17521.1784
DEPI 0.9760.97790.970.95050.98040.97770.97850.99641.00921.0356
SGAI 1.02391.00211.00471.00791.01061.02471.03341.02951.0171.0108
LVGI 1.45641.41331.41380.98591.02091.03951.04691.04681.05811.0373
TATA -0.1202-0.1315-0.1326-0.1331-0.1288-0.131-0.1235-0.1155-0.1164-0.12
M-score -2.93-3.17-3.18-2.97-2.96-2.98-2.91-2.97-2.89-2.83
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat

{{numOfNotice}}
FEEDBACK