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GuruFocus has detected 3 Warning Signs with Amazon.com Inc $AMZN.
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Amazon.com Inc (NAS:AMZN)
Beneish M-Score
-2.94 (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.

Amazon.com Inc has a M-score of -2.94 suggests that the company is not a manipulator.

AMZN' s Beneish M-Score Range Over the Past 10 Years
Min: -3.71   Max: 6.36
Current: -2.94

-3.71
6.36

During the past 13 years, the highest Beneish M-Score of Amazon.com Inc was 6.36. The lowest was -3.71. And the median was -2.75.


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 Amazon.com 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 * 1.1606+0.528 * 0.9415+0.404 * 0.9167+0.892 * 1.2708+0.115 * 1.0246
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0518+4.679 * -0.1698-0.327 * 0.9535
=-2.94

* 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 $8,339 Mil.
Revenue was 43741 + 32714 + 30404 + 29128 = $135,987 Mil.
Gross Profit was 14782 + 11454 + 11224 + 10262 = $47,722 Mil.
Total Current Assets was $45,781 Mil.
Total Assets was $83,402 Mil.
Property, Plant and Equipment(Net PPE) was $29,114 Mil.
Depreciation, Depletion and Amortization(DDA) was $8,117 Mil.
Selling, General & Admin. Expense(SGA) was $27,285 Mil.
Total Current Liabilities was $43,816 Mil.
Long-Term Debt was $15,213 Mil.
Net Income was 749 + 252 + 857 + 513 = $2,371 Mil.
Non Operating Income was 15 + 8 + -14 + 81 = $90 Mil.
Cash Flow from Operations was 10652 + 4486 + 3465 + -2160 = $16,443 Mil.
Accounts Receivable was $5,654 Mil.
Revenue was 35747 + 25358 + 23185 + 22717 = $107,007 Mil.
Gross Profit was 11406 + 8603 + 8025 + 7322 = $35,356 Mil.
Total Current Assets was $35,705 Mil.
Total Assets was $64,747 Mil.
Property, Plant and Equipment(Net PPE) was $21,838 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,281 Mil.
Selling, General & Admin. Expense(SGA) was $20,412 Mil.
Total Current Liabilities was $33,887 Mil.
Long-Term Debt was $14,175 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)
=(8339 / 135987) / (5654 / 107007)
=0.06132204 / 0.05283766
=1.1606

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)
=(35356 / 107007) / (47722 / 135987)
=0.33040829 / 0.3509306
=0.9415

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 - (45781 + 29114) / 83402) / (1 - (35705 + 21838) / 64747)
=0.10199995 / 0.11126384
=0.9167

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
=135987 / 107007
=1.2708

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))
=(6281 / (6281 + 21838)) / (8117 / (8117 + 29114))
=0.2233721 / 0.21801724
=1.0246

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)
=(27285 / 135987) / (20412 / 107007)
=0.20064418 / 0.19075388
=1.0518

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)
=((15213 + 43816) / 83402) / ((14175 + 33887) / 64747)
=0.7077648 / 0.74230466
=0.9535

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
=(2371 - 90 - 16443) / 83402
=-0.1698

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.

Amazon.com Inc has a M-score of -2.94 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.

Amazon.com Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.27570.9080.93421.1511.15261.16831.02480.9850.83781.1606
GMI 1.01451.01450.98721.00990.99570.90660.90910.92350.89230.9415
AQI 0.9821.30641.25920.71060.9510.96720.88520.99810.97640.9167
SGI 1.3851.29191.27881.39561.40561.27071.21871.19521.20251.2708
DEPI 0.99321.23951.10991.18970.96730.84081.02241.04790.97851.0247
SGAI 0.96841.00070.98921.02961.11061.11471.08421.08431.01951.0519
LVGI 0.89570.81410.86841.06261.10131.08690.99991.06170.99710.9535
TATA -0.142-0.1322-0.1752-0.1289-0.1324-0.1271-0.1261-0.1278-0.1709-0.1698
M-score -2.51-2.70-2.96-2.71-2.68-2.81-2.96-2.99-3.32-2.94

Amazon.com Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.17690.9851.02761.01781.05430.83780.86180.98340.94861.1606
GMI 0.92910.92350.9160.9050.88150.89230.89760.9090.93560.9415
AQI 1.06790.99810.97690.93950.7890.97640.93280.94030.95370.9167
SGI 1.21551.19521.17721.17181.181.20251.23331.25911.27241.2708
DEPI 1.05551.04770.99820.97970.97070.97851.01181.01091.02161.0246
SGAI 1.38781.08431.08031.06421.03641.01951.01391.01581.02931.0518
LVGI 0.9841.06171.06151.06281.04790.99710.94880.94710.94770.9535
TATA -0.1452-0.1278-0.1597-0.1696-0.1639-0.171-0.1644-0.165-0.1764-0.1698
M-score -2.87-2.99-3.13-3.21-3.21-3.32-3.23-3.09-3.15-2.94
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