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Babcock & Wilcox Co (NYSE:BWC)
Beneish M-Score
-2.16 (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: -2.16

-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 -2.27.


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 * 1.0936+0.528 * 0.7779+0.404 * 0.9924+0.892 * 0.8696+0.115 * 0.4021
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9892+4.679 * 0.1131-0.327 * 0.9773
=-2.16

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

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $446 Mil.
Revenue was 686.006 + 662.017 + 802.815 + 774.834 = $2,926 Mil.
Gross Profit was 173.698 + 159.71 + 385.301 + 196.44 = $915 Mil.
Total Current Assets was $1,330 Mil.
Total Assets was $2,626 Mil.
Property, Plant and Equipment(Net PPE) was $470 Mil.
Depreciation, Depletion and Amortization(DDA) was $72 Mil.
Selling, General & Admin. Expense(SGA) was $365 Mil.
Total Current Liabilities was $696 Mil.
Long-Term Debt was $260 Mil.
Net Income was 26.437 + 45.044 + 165.588 + 60.446 = $298 Mil.
Non Operating Income was 0.58 + 1.322 + -19.395 + -0.533 = $-18 Mil.
Cash Flow from Operations was 5.815 + -113.517 + 143.913 + -17.803 = $18 Mil.
Accounts Receivable was $469 Mil.
Revenue was 886.136 + 805.423 + 865.296 + 807.586 = $3,364 Mil.
Gross Profit was 200.093 + 185.726 + 244.334 + 188.482 = $819 Mil.
Total Current Assets was $1,417 Mil.
Total Assets was $2,725 Mil.
Property, Plant and Equipment(Net PPE) was $444 Mil.
Depreciation, Depletion and Amortization(DDA) was $25 Mil.
Selling, General & Admin. Expense(SGA) was $425 Mil.
Total Current Liabilities was $1,015 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)
=(446.086 / 2925.672) / (469.095 / 3364.441)
=0.152473 / 0.13942732
=1.0936

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)
=(159.71 / 3364.441) / (173.698 / 2925.672)
=0.24331977 / 0.31279959
=0.7779

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 - (1329.671 + 469.568) / 2626.053) / (1 - (1417.102 + 443.577) / 2725.309)
=0.31485046 / 0.31725944
=0.9924

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
=2925.672 / 3364.441
=0.8696

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))
=(24.966 / (24.966 + 443.577)) / (71.722 / (71.722 + 469.568))
=0.05328433 / 0.13250199
=0.4021

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)
=(365.448 / 2925.672) / (424.822 / 3364.441)
=0.12491079 / 0.12626823
=0.9892

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)
=((260.05 + 695.688) / 2626.053) / ((0.319 + 1014.623) / 2725.309)
=0.36394467 / 0.37241355
=0.9773

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
=(297.515 - -18.026 - 18.408) / 2626.053
=0.1131

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

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.9590.85890.92560.99821.00031.05181.06490.95760.94271.0936
GMI 1.02720.96310.98330.9050.96541.02530.9950.85220.830.7779
AQI 0.95430.95420.99310.97360.95520.98361.00270.90440.90720.9924
SGI 1.11371.12421.12971.11491.10051.0761.03250.99330.93840.8696
DEPI 1.02261.03281.09661.09271.49612.74431.05210.990.71590.4021
SGAI 0.90010.92570.92070.92960.92890.92360.94940.89180.9270.9892
LVGI 1.01940.96290.89640.91760.93440.95460.99870.93510.89690.9773
TATA 0.02950.03590.05640.0238-0.0041-0.0032-0.00080.08650.12440.1131
M-score -2.27-2.34-2.12-2.28-2.35-2.14-2.38-2.20-2.12-2.16
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