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Babcock & Wilcox Co (NYSE:BWC)
Beneish M-Score
-2.15 (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.

Babcock & Wilcox Co has a M-score of -2.16 signals that the company is a manipulator.

BWC' s 10-Year Beneish M-Score Range
Min: -2.39   Max: -2.12
Current: -2.15

-2.39
-2.12

During the past 6 years, the highest Beneish M-Score of Babcock & Wilcox Co was -2.12. The lowest was -2.39. And the median was -2.24.


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 Babcock & Wilcox Co 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 * 1.1812+0.528 * 0.7946+0.404 * 0.979+0.892 * 0.867+0.115 * 0.9387
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0158+4.679 * 0.0897-0.327 * 1.0498
=-2.16

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Sep14) TTM:Last Year (Sep13) TTM:
Accounts Receivable was $491 Mil.
Revenue was 737.902 + 686.006 + 662.017 + 802.815 = $2,889 Mil.
Gross Profit was 183.288 + 173.698 + 159.71 + 385.301 = $902 Mil.
Total Current Assets was $1,372 Mil.
Total Assets was $2,657 Mil.
Property, Plant and Equipment(Net PPE) was $463 Mil.
Depreciation, Depletion and Amortization(DDA) was $77 Mil.
Selling, General & Admin. Expense(SGA) was $372 Mil.
Total Current Liabilities was $711 Mil.
Long-Term Debt was $299 Mil.
Net Income was 61.214 + 26.437 + 45.044 + 165.588 = $298 Mil.
Non Operating Income was 18.625 + 0.58 + 1.322 + -19.395 = $1 Mil.
Cash Flow from Operations was 22.507 + 5.815 + -113.517 + 143.913 = $59 Mil.
Accounts Receivable was $479 Mil.
Revenue was 774.834 + 886.136 + 805.423 + 865.296 = $3,332 Mil.
Gross Profit was 196.44 + 200.093 + 185.726 + 244.334 = $827 Mil.
Total Current Assets was $1,430 Mil.
Total Assets was $2,740 Mil.
Property, Plant and Equipment(Net PPE) was $444 Mil.
Depreciation, Depletion and Amortization(DDA) was $68 Mil.
Selling, General & Admin. Expense(SGA) was $422 Mil.
Total Current Liabilities was $992 Mil.
Long-Term Debt was $0 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)
=(490.927 / 2888.74) / (479.34 / 3331.689)
=0.16994503 / 0.14387297
=1.1812

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)
=(173.698 / 3331.689) / (183.288 / 2888.74)
=0.24810029 / 0.31224582
=0.7946

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 - (1371.859 + 463.126) / 2656.77) / (1 - (1430.161 + 443.941) / 2739.664)
=0.30931733 / 0.31593728
=0.979

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
=2888.74 / 3331.689
=0.867

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))
=(68.22 / (68.22 + 443.941)) / (76.584 / (76.584 + 463.126))
=0.1332003 / 0.14189843
=0.9387

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)
=(371.859 / 2888.74) / (422.19 / 3331.689)
=0.12872706 / 0.12671951
=1.0158

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)
=((298.776 + 711.12) / 2656.77) / ((0.276 + 991.764) / 2739.664)
=0.38012173 / 0.3621028
=1.0498

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
=(298.283 - 1.132 - 58.718) / 2656.77
=0.0897

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.

Babcock & Wilcox Co has a M-score of -2.16 signals that the company is likely to 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 own currency.

Babcock & Wilcox Co Annual Data

Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.99820.9576
GMI 0.9050.8522
AQI 0.97360.9044
SGI 1.11490.9933
DEPI 1.09270.99
SGAI 0.92960.8918
LVGI 0.91760.9351
TATA 0.02380.0865
M-score -2.28-2.20

Babcock & Wilcox Co Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 0.85890.92560.99821.00031.05181.06490.95760.94271.09361.1812
GMI 0.96310.98330.9050.96541.02530.9950.85220.830.77790.7946
AQI 0.95420.99310.97360.95520.98361.00270.90440.90720.99240.979
SGI 1.12421.12971.11491.10051.0761.03250.99330.93840.86960.867
DEPI 1.03281.09661.09271.49612.74431.05210.990.71590.40210.9387
SGAI 0.92570.92070.92960.92890.92360.94940.89180.9270.98921.0158
LVGI 0.96290.89640.91760.93440.95460.99870.93510.89690.97731.0498
TATA 0.03590.05640.0238-0.0041-0.0032-0.00080.08650.12440.11310.0897
M-score -2.34-2.12-2.28-2.35-2.14-2.38-2.20-2.12-2.16-2.16
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