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GuruFocus has detected 5 Warning Signs with Analog Devices Inc $ADI.
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Analog Devices Inc (NAS:ADI)
Beneish M-Score
-2.72 (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.

Analog Devices Inc has a M-score of -2.72 suggests that the company is not a manipulator.

ADI' s Beneish M-Score Range Over the Past 10 Years
Min: -3.54   Max: -0.59
Current: -2.72

-3.54
-0.59

During the past 13 years, the highest Beneish M-Score of Analog Devices Inc was -0.59. The lowest was -3.54. And the median was -2.63.


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 Analog Devices 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 * 1.1891+0.528 * 0.9863+0.404 * 0.7511+0.892 * 1.0594+0.115 * 1.0112
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9811+4.679 * -0.0451-0.327 * 1.4787
=-2.72

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

This Year (Jan17) TTM:Last Year (Jan16) TTM:
Accounts Receivable was $473 Mil.
Revenue was 984.449 + 1003.623 + 869.591 + 778.766 = $3,636 Mil.
Gross Profit was 648.504 + 666.687 + 572.29 + 510.903 = $2,398 Mil.
Total Current Assets was $7,234 Mil.
Total Assets was $10,203 Mil.
Property, Plant and Equipment(Net PPE) was $629 Mil.
Depreciation, Depletion and Amortization(DDA) was $213 Mil.
Selling, General & Admin. Expense(SGA) was $485 Mil.
Total Current Liabilities was $812 Mil.
Long-Term Debt was $3,805 Mil.
Net Income was 217.129 + 296.157 + 230.43 + 170.573 = $914 Mil.
Non Operating Income was -0.345 + -1.897 + 0.504 + 0.743 = $-1 Mil.
Cash Flow from Operations was 314.492 + 486.984 + 254.003 + 320.203 = $1,376 Mil.
Accounts Receivable was $375 Mil.
Revenue was 769.429 + 978.722 + 863.365 + 821.019 = $3,433 Mil.
Gross Profit was 477.293 + 641.796 + 569.037 + 544.822 = $2,233 Mil.
Total Current Assets was $4,644 Mil.
Total Assets was $7,598 Mil.
Property, Plant and Equipment(Net PPE) was $633 Mil.
Depreciation, Depletion and Amortization(DDA) was $217 Mil.
Selling, General & Admin. Expense(SGA) was $466 Mil.
Total Current Liabilities was $594 Mil.
Long-Term Debt was $1,731 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)
=(472.511 / 3636.429) / (375.087 / 3432.535)
=0.12993819 / 0.10927405
=1.1891

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)
=(2232.948 / 3432.535) / (2398.384 / 3636.429)
=0.65052447 / 0.65954374
=0.9863

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 - (7233.733 + 628.924) / 10203.371) / (1 - (4644.134 + 633.362) / 7598.081)
=0.22940595 / 0.30541725
=0.7511

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
=3636.429 / 3432.535
=1.0594

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))
=(217.284 / (217.284 + 633.362)) / (212.56 / (212.56 + 628.924))
=0.25543411 / 0.25260136
=1.0112

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)
=(484.635 / 3636.429) / (466.263 / 3432.535)
=0.13327223 / 0.13583634
=0.9811

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)
=((3805.4 + 811.626) / 10203.371) / ((1730.948 + 594.105) / 7598.081)
=0.45250006 / 0.30600529
=1.4787

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
=(914.289 - -0.995 - 1375.682) / 10203.371
=-0.0451

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.

Analog Devices Inc has a M-score of -2.72 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.

Analog Devices Inc Annual Data

Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Oct15Oct16
DSRI 0.96670.92921.2240.93840.83021.0810.98111.12140.9811.0278
GMI 1.01211.00211.09990.8520.98181.02971.0031.00590.97141.0104
AQI 1.39110.95670.85030.72980.89690.96370.83465.62480.93560.8948
SGI 1.09541.0480.78011.37051.08390.90240.9751.08771.19910.996
DEPI 1.08741.02280.93821.1141.02881.10091.00760.96110.7241.0343
SGAI 0.92591.01841.02750.85530.96071.08041.02491.05490.87850.9672
LVGI 1.4980.9981.23521.06061.09740.89550.95381.020.98841.3844
TATA -0.11420.0378-0.055-0.065-0.0062-0.0293-0.0494-0.0352-0.0296-0.0521
M-score -2.94-2.34-2.82-2.68-2.66-2.60-2.80-0.60-2.51-2.85

Analog Devices Inc Quarterly Data

Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17
DSRI 1.12141.07380.9660.95420.9810.81710.90310.9661.02781.1891
GMI 1.00591.01331.01871.01940.97140.98340.98880.99191.01040.9863
AQI 5.62485.64945.39661.21330.93560.8660.90880.91830.89480.7511
SGI 1.08771.13971.17191.19861.19911.14091.08141.03850.9961.0594
DEPI 0.96110.78830.6940.58590.7240.85480.95581.07251.03431.0112
SGAI 1.05491.05391.05940.92620.87850.85730.86670.93270.96720.9811
LVGI 1.021.0151.01530.560.98841.38611.43581.4381.38441.4787
TATA -0.0352-0.0329-0.0444-0.0364-0.0296-0.036-0.0375-0.0428-0.0521-0.0451
M-score -0.60-0.59-0.83-2.31-2.51-2.87-2.84-2.84-2.85-2.72
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