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GuruFocus has detected 5 Warning Signs with Applied Materials Inc $AMAT.
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Applied Materials Inc (NAS:AMAT)
Beneish M-Score
-2.42 (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.

Applied Materials Inc has a M-score of -2.42 suggests that the company is not a manipulator.

AMAT' s Beneish M-Score Range Over the Past 10 Years
Min: -3.58   Max: 0.09
Current: -2.42

-3.58
0.09

During the past 13 years, the highest Beneish M-Score of Applied Materials Inc was 0.09. The lowest was -3.58. And the median was -2.49.


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 Applied Materials 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 * 1.1761+0.528 * 0.9614+0.404 * 0.8255+0.892 * 1.2395+0.115 * 1.0035
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8021+4.679 * -0.0503-0.327 * 1.0727
=-2.42

* 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 $2,369 Mil.
Revenue was 3278 + 3297 + 2821 + 2450 = $11,846 Mil.
Gross Profit was 1445 + 1399 + 1192 + 1004 = $5,040 Mil.
Total Current Assets was $9,094 Mil.
Total Assets was $15,244 Mil.
Property, Plant and Equipment(Net PPE) was $949 Mil.
Depreciation, Depletion and Amortization(DDA) was $390 Mil.
Selling, General & Admin. Expense(SGA) was $852 Mil.
Total Current Liabilities was $3,808 Mil.
Long-Term Debt was $3,125 Mil.
Net Income was 703 + 610 + 505 + 320 = $2,138 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 646 + 797 + 981 + 481 = $2,905 Mil.
Accounts Receivable was $1,625 Mil.
Revenue was 2257 + 2368 + 2490 + 2442 = $9,557 Mil.
Gross Profit was 916 + 959 + 1018 + 1016 = $3,909 Mil.
Total Current Assets was $6,910 Mil.
Total Assets was $13,326 Mil.
Property, Plant and Equipment(Net PPE) was $908 Mil.
Depreciation, Depletion and Amortization(DDA) was $375 Mil.
Selling, General & Admin. Expense(SGA) was $857 Mil.
Total Current Liabilities was $2,307 Mil.
Long-Term Debt was $3,343 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)
=(2369 / 11846) / (1625 / 9557)
=0.19998312 / 0.17003244
=1.1761

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)
=(3909 / 9557) / (5040 / 11846)
=0.40901957 / 0.42546007
=0.9614

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 - (9094 + 949) / 15244) / (1 - (6910 + 908) / 13326)
=0.34118342 / 0.41332733
=0.8255

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
=11846 / 9557
=1.2395

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))
=(375 / (375 + 908)) / (390 / (390 + 949))
=0.29228371 / 0.29126214
=1.0035

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)
=(852 / 11846) / (857 / 9557)
=0.07192301 / 0.08967249
=0.8021

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)
=((3125 + 3808) / 15244) / ((3343 + 2307) / 13326)
=0.45480189 / 0.42398319
=1.0727

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
=(2138 - 0 - 2905) / 15244
=-0.0503

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.

Applied Materials Inc has a M-score of -2.42 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.

Applied Materials Inc Annual Data

Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Oct15Oct16
DSRI 0.95250.98810.99860.9230.75970.96061.55420.84650.9781.1694
GMI 1.01451.08971.4840.73350.93841.0910.95390.94031.03530.9818
AQI 1.12421.04760.98921.00640.64832.64210.9160.88040.82981.0785
SGI 1.06190.83510.61671.90461.10140.8290.86121.20821.06471.1207
DEPI 1.02710.89861.07370.87621.08730.69830.97361.07251.03291.0013
SGAI 0.98911.21351.2340.67330.86841.44050.96150.85930.91080.8147
LVGI 0.87011.17990.78171.26411.21051.01731.04740.99351.28820.9957
TATA -0.0441-0.0649-0.0542-0.0705-0.0361-0.1439-0.0305-0.05530.014-0.0511
M-score -2.57-2.98-2.79-2.26-2.99-2.75-2.31-2.74-2.50-2.40

Applied Materials Inc Quarterly Data

Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17
DSRI 0.84650.92011.0151.130.9780.99451.03780.89811.16941.1761
GMI 0.94030.95960.97591.01121.03531.03471.03281.00540.98180.9614
AQI 0.88040.92210.9160.95260.82981.02421.07670.99081.07850.8255
SGI 1.20821.13721.09691.08631.06471.03421.02521.03571.12071.2395
DEPI 1.07251.0611.05871.04631.03291.03170.99090.98831.00131.0035
SGAI 0.85930.91290.96850.96310.91080.89680.83390.77650.81470.8021
LVGI 0.99350.94260.93090.9491.28821.24051.33261.3260.99571.0727
TATA -0.0553-0.0246-0.00590.01510.0140.0004-0.017-0.0506-0.0511-0.0503
M-score -2.74-2.56-2.42-2.20-2.50-2.48-2.54-2.85-2.40-2.42
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