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Red Hat Inc  (NYSE:RHT) Beneish M-Score: -2.92 (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 -2.92 suggests that the company is not a manipulator.

NYSE:RHT' s Beneish M-Score Range Over the Past 10 Years
Min: -5.01   Max: -1.76
Current: -2.92

-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.


Historical Data

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

* Premium members only.

Red Hat Inc Annual Data

Feb08 Feb09 Feb10 Feb11 Feb12 Feb13 Feb14 Feb15 Feb16 Feb17
Beneish M-Score Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only -2.84 -2.89 -2.93 -2.96 -2.89

Red Hat Inc Quarterly Data

Nov12 Feb13 May13 Aug13 Nov13 Feb14 May14 Aug14 Nov14 Feb15 May15 Aug15 Nov15 Feb16 May16 Aug16 Nov16 Feb17 May17 Aug17
Beneish M-Score Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only -2.91 -2.97 -2.89 -2.83 -2.92

Competitive Comparison
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap.


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 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 * 0.9827+0.528 * 0.9977+0.404 * 0.8927+0.892 * 1.1832+0.115 * 1.0561
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9774+4.679 * -0.1181-0.327 * 1.0055
=-2.92

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

This Year (Aug17) TTM:Last Year (Aug16) TTM:
Accounts Receivable was $418 Mil.
Revenue was 723.355 + 676.796 + 628.84 + 615.26 = $2,644 Mil.
Gross Profit was 616.638 + 576.1 + 536.633 + 524.807 = $2,254 Mil.
Total Current Assets was $2,332 Mil.
Total Assets was $4,639 Mil.
Property, Plant and Equipment(Net PPE) was $206 Mil.
Depreciation, Depletion and Amortization(DDA) was $89 Mil.
Selling, General, & Admin. Expense(SGA) was $1,334 Mil.
Total Current Liabilities was $1,796 Mil.
Long-Term Debt & Capital Lease Obligation was $757 Mil.
Net Income was 96.859 + 73.19 + 65.803 + 67.943 = $304 Mil.
Non-Recurring Items was -1.26 + -0.586 + -0.304 + -1.392 = $-4 Mil.
Cash Flow from Operations was 142.896 + 257.872 + 318.259 + 136.359 = $855 Mil.
Accounts Receivable was $360 Mil.
Revenue was 599.805 + 567.899 + 543.502 + 523.58 = $2,235 Mil.
Gross Profit was 512.134 + 483.851 + 462.282 + 442.532 = $1,901 Mil.
Total Current Assets was $1,848 Mil.
Total Assets was $4,101 Mil.
Property, Plant and Equipment(Net PPE) was $172 Mil.
(DDA) was $81 Mil.
Selling, General, & Admin. Expense(SGA) was $1,153 Mil.
Total Current Liabilities was $1,509 Mil.
Long-Term Debt & Capital Lease Obligation was $735 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)
=(418.449 / 2644.251) / (359.893 / 2234.786)
=0.15824859 / 0.16104137
=0.9827

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)
=(1900.799 / 2234.786) / (2254.178 / 2644.251)
=0.85055079 / 0.85248261
=0.9977

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 - (2332.363 + 206.195) / 4639.384) / (1 - (1848.22 + 172.312) / 4100.756)
=0.45282434 / 0.50727817
=0.8927

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
=2644.251 / 2234.786
=1.1832

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))
=(80.864 / (80.864 + 172.312)) / (89.4 / (89.4 + 206.195))
=0.31939836 / 0.30244084
=1.0561

6. SGAI = Sales, General and Administrative expenses Index

The ratio of c 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)
=(1333.654 / 2644.251) / (1153.218 / 2234.786)
=0.50435984 / 0.51603062
=0.9774

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)
=((756.743 + 1795.826) / 4639.384) / ((734.7 + 1509.28) / 4100.756)
=0.55019567 / 0.54721129
=1.0055

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
=(303.795 - -3.542 - 855.386) / 4639.384
=-0.1181

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 -2.92 suggests that the company will not be a manipulator.


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