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GuruFocus has detected 5 Warning Signs with Avery Dennison Corp $AVY.
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Avery Dennison Corp (NYSE:AVY)
Beneish M-Score
-2.67 (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.

Avery Dennison Corp has a M-score of -2.67 suggests that the company is not a manipulator.

AVY' s Beneish M-Score Range Over the Past 10 Years
Min: -3.67   Max: -2.29
Current: -2.67

-3.67
-2.29

During the past 13 years, the highest Beneish M-Score of Avery Dennison Corp was -2.29. The lowest was -3.67. 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 Avery Dennison Corp 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 * 1.0172+0.528 * 0.9877+0.404 * 0.9813+0.892 * 1.02+0.115 * 1.1052
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.971+4.679 * -0.0454-0.327 * 1.0547
=-2.67

* 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 $1,001 Mil.
Revenue was 1550.8 + 1508.7 + 1541.5 + 1485.5 = $6,087 Mil.
Gross Profit was 425.4 + 417.6 + 434.1 + 422.6 = $1,700 Mil.
Total Current Assets was $1,905 Mil.
Total Assets was $4,396 Mil.
Property, Plant and Equipment(Net PPE) was $915 Mil.
Depreciation, Depletion and Amortization(DDA) was $180 Mil.
Selling, General & Admin. Expense(SGA) was $1,098 Mil.
Total Current Liabilities was $2,004 Mil.
Long-Term Debt was $713 Mil.
Net Income was 62 + 89.1 + 80 + 89.6 = $321 Mil.
Non Operating Income was -4.8 + -4.6 + -50.2 + -5.6 = $-65 Mil.
Cash Flow from Operations was 219.6 + 149.7 + 222.3 + -6.3 = $585 Mil.
Accounts Receivable was $965 Mil.
Revenue was 1454.8 + 1468.1 + 1516 + 1528 = $5,967 Mil.
Gross Profit was 392.3 + 405.9 + 417.6 + 430 = $1,646 Mil.
Total Current Assets was $1,775 Mil.
Total Assets was $4,134 Mil.
Property, Plant and Equipment(Net PPE) was $848 Mil.
Depreciation, Depletion and Amortization(DDA) was $188 Mil.
Selling, General & Admin. Expense(SGA) was $1,108 Mil.
Total Current Liabilities was $1,459 Mil.
Long-Term Debt was $964 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)
=(1001 / 6086.5) / (964.7 / 5966.9)
=0.16446233 / 0.16167524
=1.0172

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)
=(1645.8 / 5966.9) / (1699.7 / 6086.5)
=0.27582162 / 0.27925737
=0.9877

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 - (1904.8 + 915.2) / 4396.4) / (1 - (1775.4 + 847.9) / 4133.7)
=0.3585661 / 0.36538694
=0.9813

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
=6086.5 / 5966.9
=1.02

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))
=(188.3 / (188.3 + 847.9)) / (180.1 / (180.1 + 915.2))
=0.18172168 / 0.16442984
=1.1052

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)
=(1097.5 / 6086.5) / (1108.1 / 5966.9)
=0.1803171 / 0.18570782
=0.971

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)
=((713.4 + 2004.3) / 4396.4) / ((963.6 + 1459.1) / 4133.7)
=0.61816486 / 0.58608511
=1.0547

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
=(320.7 - -65.2 - 585.3) / 4396.4
=-0.0454

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.

Avery Dennison Corp has a M-score of -2.67 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.

Avery Dennison Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.08170.83461.04711.11640.87111.10560.99790.91421.06821.0172
GMI 1.01011.0610.96561.0181.03730.96850.97711.02260.94570.9877
AQI 1.35251.04150.88440.96550.91120.97611.05331.03441.02030.9813
SGI 1.13131.06380.88710.97131.01091.00321.04721.0310.94261.02
DEPI 1.02190.81750.95371.00540.88171.04170.98310.96971.03021.1052
SGAI 1.03381.03681.09660.95660.95611.00510.9760.95731.01440.971
LVGI 1.14021.0290.990.92520.95681.03970.99881.07021.00811.0547
TATA -0.0219-0.0393-0.2248-0.0295-0.0364-0.0449-0.0151-0.0095-0.0317-0.0454
M-score -2.29-2.75-3.67-2.51-2.77-2.63-2.50-2.57-2.64-2.67

Avery Dennison Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.98630.91420.89270.91420.94741.06821.09831.06091.09341.0172
GMI 1.01381.02261.00020.98690.96010.94570.95960.96330.98050.9877
AQI 0.97961.03441.011.00841.02511.02031.01271.02031.04060.9813
SGI 1.04471.0311.01890.99260.96950.94260.93920.95840.97931.02
DEPI 1.03360.96970.92990.95850.96571.03021.09511.06661.13441.1052
SGAI 0.9550.95650.97440.97690.99731.01530.99540.9920.98160.971
LVGI 1.07571.07021.09081.04081.00011.00811.0171.02771.0491.0547
TATA -0.034-0.0097-0.0341-0.0424-0.0201-0.0317-0.0262-0.03-0.0352-0.0454
M-score -2.63-2.57-2.75-2.78-2.66-2.64-2.58-2.61-2.57-2.67
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