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GuruFocus has detected 4 Warning Signs with Discovery Communications Inc $DISCK.
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Discovery Communications Inc (NAS:DISCK)
Beneish M-Score
-2.52 (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.

Discovery Communications Inc has a M-score of -2.52 suggests that the company is not a manipulator.

DISCK' s Beneish M-Score Range Over the Past 10 Years
Min: -3.86   Max: 4.99
Current: -2.52

-3.86
4.99

During the past 13 years, the highest Beneish M-Score of Discovery Communications Inc was 4.99. The lowest was -3.86. And the median was -2.47.


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 Discovery Communications 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 * 0.9948+0.528 * 1.0126+0.404 * 0.9986+0.892 * 1.0161+0.115 * 1.0073
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9965+4.679 * -0.0092-0.327 * 1.0294
=-2.52

* 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 $1,495 Mil.
Revenue was 1672 + 1556 + 1708 + 1561 = $6,497 Mil.
Gross Profit was 1027 + 964 + 1105 + 969 = $4,065 Mil.
Total Current Assets was $2,599 Mil.
Total Assets was $15,758 Mil.
Property, Plant and Equipment(Net PPE) was $482 Mil.
Depreciation, Depletion and Amortization(DDA) was $322 Mil.
Selling, General & Admin. Expense(SGA) was $1,690 Mil.
Total Current Liabilities was $1,561 Mil.
Long-Term Debt was $7,841 Mil.
Net Income was 304 + 219 + 408 + 263 = $1,194 Mil.
Non Operating Income was 21 + -46 + 15 + -24 = $-34 Mil.
Cash Flow from Operations was 546 + 436 + 329 + 62 = $1,373 Mil.
Accounts Receivable was $1,479 Mil.
Revenue was 1646 + 1557 + 1654 + 1537 = $6,394 Mil.
Gross Profit was 1006 + 983 + 1090 + 972 = $4,051 Mil.
Total Current Assets was $2,596 Mil.
Total Assets was $15,864 Mil.
Property, Plant and Equipment(Net PPE) was $488 Mil.
Depreciation, Depletion and Amortization(DDA) was $330 Mil.
Selling, General & Admin. Expense(SGA) was $1,669 Mil.
Total Current Liabilities was $1,579 Mil.
Long-Term Debt was $7,616 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)
=(1495 / 6497) / (1479 / 6394)
=0.2301062 / 0.2313106
=0.9948

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)
=(4051 / 6394) / (4065 / 6497)
=0.63356272 / 0.62567339
=1.0126

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 - (2599 + 482) / 15758) / (1 - (2596 + 488) / 15864)
=0.80448026 / 0.80559758
=0.9986

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
=6497 / 6394
=1.0161

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))
=(330 / (330 + 488)) / (322 / (322 + 482))
=0.40342298 / 0.40049751
=1.0073

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)
=(1690 / 6497) / (1669 / 6394)
=0.26012006 / 0.26102596
=0.9965

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)
=((7841 + 1561) / 15758) / ((7616 + 1579) / 15864)
=0.59664932 / 0.57961422
=1.0294

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
=(1194 - -34 - 1373) / 15758
=-0.0092

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.

Discovery Communications Inc has a M-score of -2.52 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.

Discovery Communications Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.61581.72181.03651.01121.05281.00740.98360.92341.01130.9948
GMI 1.61560.29961.00640.96071.01230.98531.04851.05131.04331.0126
AQI 1.04190.91540.94580.99540.94770.99311.06051.00560.99540.9986
SGI 0.110545.30261.00441.07171.12471.07651.23361.13191.02061.0161
DEPI 0.20922.51751.34641.10551.04031.03140.66320.93770.92361.0073
SGAI 1.12521.11871.06080.92210.88691.02091.00660.93540.96650.9965
LVGI 0.984420.52040.92221.02741.04781.14271.091.03811.07561.0294
TATA -0.0469-0.0196-0.00970.01880.0054-0.0049-0.0185-0.0121-0.0093-0.0092
M-score -3.6130.98-2.45-2.32-2.30-2.49-2.39-2.47-2.50-2.52

Discovery Communications Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.92430.92340.96680.90991.11321.01131.05771.03990.89750.9948
GMI 1.04451.05131.0451.04491.04921.04331.0381.03451.0271.0126
AQI 1.00271.00561.02891.00470.98480.99540.99130.99741.00460.9986
SGI 1.17851.13191.10381.08461.04861.02061.00421.00571.00731.0161
DEPI 0.80210.93771.01410.94870.97070.92360.91940.94920.96171.0073
SGAI 0.95680.93540.92860.95150.93840.96650.99220.95930.99450.9965
LVGI 1.03681.03811.04731.04381.06971.07561.05481.08241.04591.0294
TATA -0.0079-0.01210.0012-0.00550.0062-0.0093-0.008-0.0045-0.0172-0.0092
M-score -2.43-2.47-2.38-2.50-2.30-2.50-2.47-2.47-2.65-2.52
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