loanDepot 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 loanDepot 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 * 1.029 | + | 0.528 * 1 | + | 0.404 * 1.0405 | + | 0.892 * 0.644 | + | 0.115 * 0.9234 |
| - | 0.172 * SGAI | + | 4.679 * TATA | - | 0.327 * LVGI |
| - | 0.172 * 0.9326 | + | 4.679 * 0.010417 | - | 0.327 * 1.0097 |
| = | -2.71 |
* 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 (Dec23) TTM: | Last Year (Dec22) TTM: |
Total Receivables was $106.2 Mil.
Revenue was 164.581 + 203.559 + 214.02 + 157.107 = $739.3 Mil.
Gross Profit was 164.581 + 203.559 + 214.02 + 157.107 = $739.3 Mil.
Total Current Assets was $766.9 Mil.
Total Assets was $6,151.0 Mil.
Property, Plant and Equipment(Net PPE) was $100.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $55.4 Mil.
Selling, General, & Admin. Expense(SGA) was $918.6 Mil.
Total Current Liabilities was $3,227.6 Mil.
Long-Term Debt & Capital Lease Obligation was $1,342.4 Mil.
Net Income was -27.192 + -16.599 + -23.443 + -42.907 = $-110.1 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0.0 Mil.
Cash Flow from Operations was -205.418 + 163.284 + -337.433 + 205.352 = $-174.2 Mil.
|
Total Receivables was $160.3 Mil.
Revenue was 143.471 + 231.523 + 323.876 + 449.007 = $1,147.9 Mil.
Gross Profit was 143.471 + 231.523 + 323.876 + 449.007 = $1,147.9 Mil.
Total Current Assets was $1,024.3 Mil.
Total Assets was $6,609.9 Mil.
Property, Plant and Equipment(Net PPE) was $128.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $63.0 Mil.
Selling, General, & Admin. Expense(SGA) was $1,529.5 Mil.
Total Current Liabilities was $3,476.7 Mil.
Long-Term Debt & Capital Lease Obligation was $1,387.2 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) |
| = | (106.232 / 739.267) | / | (160.299 / 1147.877) |
| = | 0.143699 | / | 0.139648 |
| | = | 1.029 |
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) |
| = | (1147.877 / 1147.877) | / | (739.267 / 739.267) |
| = | 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 - (766.939 + 100.242) / 6151.048) | / | (1 - (1024.255 + 128.557) / 6609.934) |
| = | 0.859019 | / | 0.825594 |
| | = | 1.0405 |
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 |
| = | 739.267 | / | 1147.877 |
| | = | 0.644 |
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)) |
| = | (62.971 / (62.971 + 128.557)) | / | (55.423 / (55.423 + 100.242)) |
| = | 0.328782 | / | 0.35604 |
| | = | 0.9234 |
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) |
| = | (918.622 / 739.267) | / | (1529.514 / 1147.877) |
| = | 1.242612 | / | 1.332472 |
| | = | 0.9326 |
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) |
| = | ((1342.443 + 3227.617) / 6151.048) | / | ((1387.16 + 3476.728) / 6609.934) |
| = | 0.742973 | / | 0.735845 |
| | = | 1.0097 |
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 |
| = | (-110.141 - 0 | - | -174.215) | / | 6151.048 |
| | = | 0.010417 |
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.
loanDepot has a M-score of -2.71 suggests that the company is unlikely to be a manipulator.
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