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GuruFocus has detected 7 Warning Signs with Aetna Inc $AET.
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Aetna Inc (NYSE:AET)
Beneish M-Score
-2.75 (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.

Aetna Inc has a M-score of -2.75 suggests that the company is not a manipulator.

AET' s Beneish M-Score Range Over the Past 10 Years
Min: -2.9   Max: -0.87
Current: -2.75

-2.9
-0.87

During the past 13 years, the highest Beneish M-Score of Aetna Inc was -0.87. The lowest was -2.90. And the median was -2.42.


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 Aetna 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 * 0.9358+0.528 * 1.0283+0.404 * 0.773+0.892 * 1.0467+0.115 * 0.9603
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9916+4.679 * -0.0194-0.327 * 1.2478
=-2.75

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

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $4,580 Mil.
Revenue was 15727.8 + 15781.5 + 15952.3 + 15693.4 = $63,155 Mil.
Gross Profit was 4132.7 + 4154.8 + 4194.7 + 4316.8 = $16,799 Mil.
Total Current Assets was $28,449 Mil.
Total Assets was $69,146 Mil.
Property, Plant and Equipment(Net PPE) was $587 Mil.
Depreciation, Depletion and Amortization(DDA) was $681 Mil.
Selling, General & Admin. Expense(SGA) was $12,085 Mil.
Total Current Liabilities was $18,694 Mil.
Long-Term Debt was $19,027 Mil.
Net Income was 139.4 + 603.9 + 790.8 + 726.6 = $2,261 Mil.
Non Operating Income was -60.5 + -61.4 + 65.7 + -62.8 = $-119 Mil.
Cash Flow from Operations was -902 + 2411.2 + 428.9 + 1780.9 = $3,719 Mil.
Accounts Receivable was $4,676 Mil.
Revenue was 15049 + 14953 + 15240.9 + 15094.1 = $60,337 Mil.
Gross Profit was 3958.4 + 4014.7 + 4205.4 + 4325.5 = $16,504 Mil.
Total Current Assets was $12,725 Mil.
Total Assets was $53,509 Mil.
Property, Plant and Equipment(Net PPE) was $630 Mil.
Depreciation, Depletion and Amortization(DDA) was $671 Mil.
Selling, General & Admin. Expense(SGA) was $11,644 Mil.
Total Current Liabilities was $15,609 Mil.
Long-Term Debt was $7,785 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)
=(4580 / 63155) / (4676 / 60337)
=0.07251999 / 0.07749805
=0.9358

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)
=(16504 / 60337) / (16799 / 63155)
=0.27353034 / 0.26599636
=1.0283

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 - (28449 + 587) / 69146) / (1 - (12725 + 630) / 53509)
=0.58007694 / 0.75041582
=0.773

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
=63155 / 60337
=1.0467

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))
=(671 / (671 + 630)) / (681 / (681 + 587))
=0.51575711 / 0.53706625
=0.9603

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)
=(12085 / 63155) / (11644 / 60337)
=0.1913546 / 0.19298275
=0.9916

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)
=((19027 + 18694) / 69146) / ((7785 + 15609) / 53509)
=0.54552686 / 0.43719748
=1.2478

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
=(2260.7 - -119 - 3719) / 69146
=-0.0194

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.

Aetna Inc has a M-score of -2.75 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.

Aetna Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.03450.84090.66461.15770.92781.02241.70871.00310.91950.9358
GMI 1.02521.09831.07130.89310.91541.02261.16490.97910.95121.0283
AQI 0.99150.95590.94990.99191.04030.94641.00510.96820.97820.773
SGI 1.09761.12141.12320.98510.98651.08341.29221.22641.04021.0467
DEPI 1.04071.04861.03970.94261.02480.97991.0310.91020.9390.9603
SGAI 0.95381.01630.98811.03681.05810.93280.9731.02171.03330.9916
LVGI 1.06361.46450.9971.04021.00031.11081.13591.06341.0061.2478
TATA -0.0082-0.0295-0.03770.0119-0.01050.0241-0.0048-0.017-0.0228-0.0192
M-score -2.40-2.77-2.83-2.38-2.64-2.31-1.54-2.41-2.67-2.75

Aetna Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 2.1721.00312.70971.12851.22020.91950.89970.97011.09340.9358
GMI 1.07110.97910.97430.94770.9520.95120.97361.00711.01841.0283
AQI 0.98640.96820.97340.9770.98210.97820.95880.77140.75940.773
SGI 1.28091.22641.14211.09341.06461.04021.0311.03031.04021.0467
DEPI 0.86590.91020.95040.96760.94750.9390.93770.93840.95970.9603
SGAI 0.99481.02171.04791.05681.05251.03331.01270.99420.9750.9916
LVGI 1.02671.06341.0361.02021.02481.0061.01611.25361.27381.2478
TATA -0.0223-0.017-0.0169-0.0062-0.0076-0.0228-0.028-0.0258-0.0441-0.0194
M-score -1.25-2.41-0.91-2.36-2.31-2.67-2.72-2.78-2.74-2.75
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