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GuruFocus has detected 5 Warning Signs with DGSE Companies Inc $DGSE.
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DGSE Companies Inc (AMEX:DGSE)
Beneish M-Score
-3.71 (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.

DGSE Companies Inc has a M-score of -3.71 suggests that the company is not a manipulator.

DGSE' s Beneish M-Score Range Over the Past 10 Years
Min: -10000000   Max: 8.3
Current: -3.71

-10000000
8.3

During the past 13 years, the highest Beneish M-Score of DGSE Companies Inc was 8.30. The lowest was -10000000.00. 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 DGSE Companies Inc 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 * 1.5532+0.528 * 1.0557+0.404 * 1.0751+0.892 * 0.8713+0.115 * 0.3668
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0751+4.679 * -0.3238-0.327 * 1.2616
=-3.71

* 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 $0.23 Mil.
Revenue was 10.572 + 15.498 + 11.775 + 16.576 = $54.42 Mil.
Gross Profit was 1.868 + 2.282 + 2.149 + 2.437 = $8.74 Mil.
Total Current Assets was $10.61 Mil.
Total Assets was $12.47 Mil.
Property, Plant and Equipment(Net PPE) was $1.74 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.52 Mil.
Selling, General & Admin. Expense(SGA) was $10.44 Mil.
Total Current Liabilities was $11.26 Mil.
Long-Term Debt was $0.00 Mil.
Net Income was -1.51 + -0.537 + -0.69 + -0.895 = $-3.63 Mil.
Non Operating Income was 0.003 + 0 + 0.001 + 0.001 = $0.01 Mil.
Cash Flow from Operations was 0.264 + -0.336 + -0.179 + 0.65 = $0.40 Mil.
Accounts Receivable was $0.17 Mil.
Revenue was 16.524 + 14.943 + 12.875 + 18.12 = $62.46 Mil.
Gross Profit was 2.387 + 2.569 + 2.333 + 3.296 = $10.59 Mil.
Total Current Assets was $12.36 Mil.
Total Assets was $16.81 Mil.
Property, Plant and Equipment(Net PPE) was $4.31 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.40 Mil.
Selling, General & Admin. Expense(SGA) was $11.15 Mil.
Total Current Liabilities was $9.73 Mil.
Long-Term Debt was $2.32 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)
=(0.226 / 54.421) / (0.167 / 62.462)
=0.00415281 / 0.00267363
=1.5532

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)
=(10.585 / 62.462) / (8.736 / 54.421)
=0.16946303 / 0.16052627
=1.0557

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 - (10.611 + 1.741) / 12.466) / (1 - (12.359 + 4.309) / 16.811)
=0.00914487 / 0.00850634
=1.0751

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
=54.421 / 62.462
=0.8713

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))
=(0.397 / (0.397 + 4.309)) / (0.52 / (0.52 + 1.741))
=0.08436039 / 0.22998673
=0.3668

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)
=(10.441 / 54.421) / (11.147 / 62.462)
=0.19185608 / 0.1784605
=1.0751

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)
=((0.004 + 11.264) / 12.466) / ((2.32 + 9.725) / 16.811)
=0.9038986 / 0.71649515
=1.2616

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
=(-3.632 - 0.005 - 0.399) / 12.466
=-0.3238

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.

DGSE Companies Inc has a M-score of -3.71 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.

DGSE Companies Inc Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 1.23922.50820.31640.39891.13911.31030.49550.33296.8280.2955
GMI 1.13270.90051.45410.85420.95621.03940.76121.16420.91211.1201
AQI 1.33892.83670.49820.98730.026525.861.00611.13890.0561.6358
SGI 1.23331.43571.60760.84340.96721.68540.91890.68110.81220.8611
DEPI 0.95752.0930.60771.17160.92161.36090.50961.75690.88780.7242
SGAI 0.86961.22510.53141.53481.12530.66942.04410.85031.08631.0216
LVGI 1.01080.91421.32961.01491.50140.49040.80951.60711.16621.1213
TATA 0.03050.1243-0.2154-0.05170.1491-0.0944-0.0726-0.1934-0.1647-0.1482
M-score -1.690.68-3.61-3.57-2.298.30-3.65-4.231.43-3.70

DGSE Companies Inc Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
DSRI 0.94112.20847.27660.06551.11230.87240.295512.20071.19571.5532
GMI 0.98140.91660.960.94421.02981.10841.12011.12591.17381.0557
AQI 0.05990.06060.0560.06811.13941.07441.63581.06310.89681.0751
SGI 0.63070.67030.76220.80310.83560.85080.86110.91250.95860.8713
DEPI 1.40721.17540.88780.51160.79860.91580.72420.87920.81910.3668
SGAI 1.0791.08591.04741.04540.93840.96041.02170.97711.00281.0751
LVGI 1.9051.21541.16621.19440.96581.04591.12131.16391.21091.2616
TATA -0.4551-0.3064-0.1677-0.20050.0015-0.0597-0.1483-0.1865-0.1828-0.3238
M-score -5.65-3.581.82-4.99-2.45-2.94-3.706.90-3.23-3.71
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