Steadfast Group 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 Steadfast Group 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 * 0.9292 | + | 0.528 * 1 | + | 0.404 * 1.0363 | + | 0.892 * 1.2713 | + | 0.115 * 0.9838 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 1.0172 | + | 4.679 * -0.055475 | - | 0.327 * 1.0001 |
| = | -2.55 |
* 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 (Jun23) TTM: | Last Year (Jun22) TTM: |
Total Receivables was A$924 Mil.
Revenue was A$1,008 Mil.
Gross Profit was A$1,008 Mil.
Total Current Assets was A$2,082 Mil.
Total Assets was A$4,885 Mil.
Property, Plant and Equipment(Net PPE) was A$123 Mil.
Depreciation, Depletion and Amortization(DDA) was A$88 Mil.
Selling, General, & Admin. Expense(SGA) was A$545 Mil.
Total Current Liabilities was A$1,498 Mil.
Long-Term Debt & Capital Lease Obligation was A$968 Mil.
Net Income was A$189 Mil.
Gross Profit was A$36 Mil.
Cash Flow from Operations was A$425 Mil.
|
Total Receivables was A$782 Mil.
Revenue was A$793 Mil.
Gross Profit was A$793 Mil.
Total Current Assets was A$1,738 Mil.
Total Assets was A$3,917 Mil.
Property, Plant and Equipment(Net PPE) was A$105 Mil.
Depreciation, Depletion and Amortization(DDA) was A$73 Mil.
Selling, General, & Admin. Expense(SGA) was A$421 Mil.
Total Current Liabilities was A$1,095 Mil.
Long-Term Debt & Capital Lease Obligation was A$882 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) |
| = | (923.5 / 1008.4) | / | (781.8 / 793.2) |
| = | 0.915807 | / | 0.985628 |
| | = | 0.9292 |
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) |
| = | (793.2 / 793.2) | / | (1008.4 / 1008.4) |
| = | 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 - (2081.5 + 122.7) / 4885.1) | / | (1 - (1737.8 + 104.6) / 3916.5) |
| = | 0.548791 | / | 0.52958 |
| | = | 1.0363 |
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 |
| = | 1008.4 | / | 793.2 |
| | = | 1.2713 |
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)) |
| = | (73.2 / (73.2 + 104.6)) | / | (88.3 / (88.3 + 122.7)) |
| = | 0.411699 | / | 0.418483 |
| | = | 0.9838 |
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) |
| = | (544.7 / 1008.4) | / | (421.2 / 793.2) |
| = | 0.540163 | / | 0.531014 |
| | = | 1.0172 |
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) |
| = | ((967.5 + 1498.2) / 4885.1) | / | ((881.7 + 1095) / 3916.5) |
| = | 0.504739 | / | 0.504711 |
| | = | 1.0001 |
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 |
| = | (189.2 - 35.6 | - | 424.6) | / | 4885.1 |
| | = | -0.055475 |
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.
Steadfast Group has a M-score of -2.55 suggests that the company is unlikely to be a manipulator.
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