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GuruFocus has detected 1 Warning Sign with CVS Health Corp $CVS.
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CVS Health Corp (NYSE:CVS)
Beneish M-Score
-2.63 (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.

CVS Health Corp has a M-score of -2.63 suggests that the company is not a manipulator.

CVS' s Beneish M-Score Range Over the Past 10 Years
Min: -2.95   Max: -0.26
Current: -2.63

-2.95
-0.26

During the past 13 years, the highest Beneish M-Score of CVS Health Corp was -0.26. The lowest was -2.95. And the median was -2.45.


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 CVS Health 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 * 0.8835+0.528 * 1.0646+0.404 * 0.9882+0.892 * 1.1581+0.115 * 0.895
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9366+4.679 * -0.0435-0.327 * 1.0402
=-2.63

* 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 $12,164 Mil.
Revenue was 45971 + 44615 + 43725 + 43215 = $177,526 Mil.
Gross Profit was 7606 + 7492 + 7015 + 6744 = $28,857 Mil.
Total Current Assets was $31,042 Mil.
Total Assets was $94,462 Mil.
Property, Plant and Equipment(Net PPE) was $10,175 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,475 Mil.
Selling, General & Admin. Expense(SGA) was $18,519 Mil.
Total Current Liabilities was $26,250 Mil.
Long-Term Debt was $25,615 Mil.
Net Income was 1707 + 1540 + 924 + 1146 = $5,317 Mil.
Non Operating Income was 0 + -101 + -542 + 0 = $-643 Mil.
Cash Flow from Operations was 2121 + 3925 + 1611 + 2412 = $10,069 Mil.
Accounts Receivable was $11,888 Mil.
Revenue was 41146 + 38644 + 37169 + 36332 = $153,291 Mil.
Gross Profit was 7301 + 6661 + 6402 + 6164 = $26,528 Mil.
Total Current Assets was $30,378 Mil.
Total Assets was $93,657 Mil.
Property, Plant and Equipment(Net PPE) was $9,855 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,092 Mil.
Selling, General & Admin. Expense(SGA) was $17,074 Mil.
Total Current Liabilities was $23,169 Mil.
Long-Term Debt was $26,267 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)
=(12164 / 177526) / (11888 / 153291)
=0.06851954 / 0.07755185
=0.8835

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)
=(26528 / 153291) / (28857 / 177526)
=0.17305647 / 0.16255084
=1.0646

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 - (31042 + 10175) / 94462) / (1 - (30378 + 9855) / 93657)
=0.56366581 / 0.57042186
=0.9882

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
=177526 / 153291
=1.1581

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))
=(2092 / (2092 + 9855)) / (2475 / (2475 + 10175))
=0.17510672 / 0.19565217
=0.895

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)
=(18519 / 177526) / (17074 / 153291)
=0.10431711 / 0.11138293
=0.9366

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)
=((25615 + 26250) / 94462) / ((26267 + 23169) / 93657)
=0.54905676 / 0.52784095
=1.0402

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
=(5317 - -643 - 10069) / 94462
=-0.0435

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.

CVS Health Corp has a M-score of -2.63 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.

CVS Health Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.10571.02590.89790.92421.10530.93111.30991.00941.11570.8835
GMI 1.29131.00921.0130.98251.09441.05030.97421.03081.05181.0646
AQI 2.69390.93870.98550.99040.9990.97780.92541.01041.07430.9882
SGI 1.74211.1461.12870.97651.11081.14971.02951.09941.09991.1581
DEPI 0.76721.16220.90880.99420.96020.92570.94650.99511.02350.895
SGAI 0.7410.94431.00821.03570.90910.93381.00110.9570.93690.9366
LVGI 0.72791.01180.96640.92871.03361.06061.13631.0471.27571.0402
TATA -0.0108-0.0121-0.0055-0.0217-0.0371-0.0371-0.0167-0.04-0.0339-0.0435
M-score -0.83-2.38-2.48-2.67-2.41-2.58-2.34-2.56-2.46-2.63

CVS Health Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.25061.00941.00641.03631.07071.11571.14441.05680.91930.8835
GMI 1.0211.03081.04851.05811.07051.05181.05731.06041.04841.0646
AQI 0.96861.01040.97880.96271.04981.07431.07981.09371.00360.9882
SGI 1.07751.09941.11131.10251.10441.09991.121.14531.15751.1581
DEPI 0.9810.99510.97560.99261.03111.02350.97860.93050.88290.895
SGAI 0.97320.9570.95120.94530.92960.93690.94250.94780.94950.9366
LVGI 1.15291.0471.06451.07781.28331.27571.29121.31171.06531.0402
TATA -0.0156-0.04-0.0364-0.0376-0.0347-0.0339-0.0397-0.0438-0.0613-0.0435
M-score -2.30-2.56-2.54-2.53-2.50-2.46-2.45-2.53-2.70-2.63
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