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GuruFocus has detected 4 Warning Signs with Cognizant Technology Solutions Corp $CTSH.
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Cognizant Technology Solutions Corp (NAS:CTSH)
Beneish M-Score
-2.11 (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.

Cognizant Technology Solutions Corp has a M-score of -2.36 suggests that the company is not a manipulator.

CTSH' s Beneish M-Score Range Over the Past 10 Years
Min: -2.74   Max: -1.36
Current: -2.11

-2.74
-1.36

During the past 13 years, the highest Beneish M-Score of Cognizant Technology Solutions Corp was -1.36. The lowest was -2.74. And the median was -2.22.


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 Cognizant Technology Solutions 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 * 1.0496+0.528 * 1.0038+0.404 * 0.9999+0.892 * 1.1117+0.115 * 0.8878
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9916+4.679 * -0.0097-0.327 * 0.9221
=-2.36

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $2,492 Mil.
Revenue was 3453.2 + 3369.9 + 3202 + 3232.5 = $13,258 Mil.
Gross Profit was 1375.8 + 1332.2 + 1286.6 + 1298.9 = $5,294 Mil.
Total Current Assets was $8,200 Mil.
Total Assets was $13,717 Mil.
Property, Plant and Equipment(Net PPE) was $1,323 Mil.
Depreciation, Depletion and Amortization(DDA) was $366 Mil.
Selling, General & Admin. Expense(SGA) was $2,659 Mil.
Total Current Liabilities was $2,301 Mil.
Long-Term Debt was $822 Mil.
Net Income was 444.4 + 252.4 + 441.2 + 423.4 = $1,561 Mil.
Non Operating Income was 7.2 + -19.3 + 9.6 + -15.3 = $-18 Mil.
Cash Flow from Operations was 594 + 359.6 + 68.8 + 690 = $1,712 Mil.
Accounts Receivable was $2,136 Mil.
Revenue was 3187 + 3085.1 + 2911.4 + 2742.2 = $11,926 Mil.
Gross Profit was 1252.4 + 1240.3 + 1184.2 + 1102.8 = $4,780 Mil.
Total Current Assets was $7,238 Mil.
Total Assets was $12,268 Mil.
Property, Plant and Equipment(Net PPE) was $1,279 Mil.
Depreciation, Depletion and Amortization(DDA) was $305 Mil.
Selling, General & Admin. Expense(SGA) was $2,413 Mil.
Total Current Liabilities was $2,128 Mil.
Long-Term Debt was $900 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)
=(2492.1 / 13257.6) / (2135.7 / 11925.7)
=0.1879752 / 0.17908383
=1.0496

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)
=(4779.7 / 11925.7) / (5293.5 / 13257.6)
=0.40078989 / 0.39928041
=1.0038

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 - (8199.8 + 1323.3) / 13716.7) / (1 - (7237.9 + 1278.9) / 12267.6)
=0.30572951 / 0.30574848
=0.9999

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
=13257.6 / 11925.7
=1.1117

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))
=(304.9 / (304.9 + 1278.9)) / (366.4 / (366.4 + 1323.3))
=0.19251168 / 0.21684323
=0.8878

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)
=(2659.3 / 13257.6) / (2412.5 / 11925.7)
=0.20058683 / 0.2022942
=0.9916

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)
=((821.6 + 2300.7) / 13716.7) / ((900 + 2128.4) / 12267.6)
=0.22762764 / 0.24686165
=0.9221

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
=(1561.4 - -17.8 - 1712.4) / 13716.7
=-0.0097

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.

Cognizant Technology Solutions Corp has a M-score of -2.36 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.

Cognizant Technology Solutions Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.97521.00711.0511.0210.87210.9511.01791.02890.94581.0446
GMI 1.02650.98581.01291.03311.00011.01021.03231.00741.00211.0048
AQI 2.64641.45490.86580.65571.11820.93530.98682.98210.89571.0259
SGI 1.49941.31881.16421.40071.33291.20021.20371.16051.20981.0863
DEPI 1.02140.9320.90140.96711.151.0140.9730.99760.69390.9586
SGAI 0.96011.00060.95030.96211.02540.97680.92141.0161.01791.0022
LVGI 0.98490.88071.18671.04841.08150.96161.03291.40960.89480.8193
TATA 0.00140.0104-0.0419-0.00480.0027-0.0158-0.0192-0.0011-0.03710.1109
M-score -1.36-1.93-2.59-2.26-2.25-2.42-2.36-1.65-2.56-1.78

Cognizant Technology Solutions Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.81711.02891.03971.00610.97770.94580.95260.97821.04961.0446
GMI 1.01341.00741.00971.00671.00121.00211.00441.00751.00381.0049
AQI 0.8252.98213.0053.20813.25940.89570.93870.98040.99991.0259
SGI 1.17071.16051.1631.17911.20761.20981.18181.14771.11171.0863
DEPI 0.97980.99760.91220.83980.77480.69390.74210.820.88780.9335
SGAI 0.97931.0161.0331.04361.03791.0180.99550.98330.99161.0021
LVGI 0.89741.40961.35951.34761.3080.89480.92550.92630.92210.8193
TATA -0.0254-0.0011-0.00070.0002-0.0151-0.0371-0.025-0.029-0.00970.0393
M-score -2.64-1.65-1.62-1.56-1.61-2.56-2.51-2.50-2.36-2.11
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