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GuruFocus has detected 2 Warning Signs with Devon Energy Corp $DVN.
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Devon Energy Corp (NYSE:DVN)
Beneish M-Score
-2.94 (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.

Devon Energy Corp has a M-score of -2.94 suggests that the company is not a manipulator.

DVN' s Beneish M-Score Range Over the Past 10 Years
Min: -5.87   Max: 4.53
Current: -2.94

-5.87
4.53

During the past 13 years, the highest Beneish M-Score of Devon Energy Corp was 4.53. The lowest was -5.87. And the median was -2.86.


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 Devon Energy 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 * 1.4602+0.528 * 0.8745+0.404 * 1.0631+0.892 * 0.9279+0.115 * 1.4145
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0126+4.679 * -0.1808-0.327 * 0.9454
=-2.94

* 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 $1,195 Mil.
Revenue was 3350 + 4233 + 2488 + 2126 = $12,197 Mil.
Gross Profit was 2983 + 3878 + 734 + 616 = $8,211 Mil.
Total Current Assets was $3,772 Mil.
Total Assets was $25,913 Mil.
Property, Plant and Equipment(Net PPE) was $16,190 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,792 Mil.
Selling, General & Admin. Expense(SGA) was $3,733 Mil.
Total Current Liabilities was $2,616 Mil.
Long-Term Debt was $10,154 Mil.
Net Income was 331 + 993 + -1570 + -3056 = $-3,302 Mil.
Non Operating Income was -104 + -137 + -92 + -30 = $-363 Mil.
Cash Flow from Operations was 536 + 726 + 335 + 149 = $1,746 Mil.
Accounts Receivable was $882 Mil.
Revenue was 2886 + 3601 + 3393 + 3265 = $13,145 Mil.
Gross Profit was 2407 + 3091 + 968 + 1273 = $7,739 Mil.
Total Current Assets was $4,021 Mil.
Total Assets was $29,451 Mil.
Property, Plant and Equipment(Net PPE) was $19,068 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,129 Mil.
Selling, General & Admin. Expense(SGA) was $3,973 Mil.
Total Current Liabilities was $3,295 Mil.
Long-Term Debt was $12,056 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)
=(1195 / 12197) / (882 / 13145)
=0.09797491 / 0.06709776
=1.4602

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)
=(7739 / 13145) / (8211 / 12197)
=0.58874097 / 0.67319833
=0.8745

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 - (3772 + 16190) / 25913) / (1 - (4021 + 19068) / 29451)
=0.22965307 / 0.21601983
=1.0631

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
=12197 / 13145
=0.9279

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))
=(3129 / (3129 + 19068)) / (1792 / (1792 + 16190))
=0.140965 / 0.09965521
=1.4145

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)
=(3733 / 12197) / (3973 / 13145)
=0.30605887 / 0.3022442
=1.0126

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)
=((10154 + 2616) / 25913) / ((12056 + 3295) / 29451)
=0.49280284 / 0.52123867
=0.9454

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
=(-3302 - -363 - 1746) / 25913
=-0.1808

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.

Devon Energy Corp has a M-score of -2.94 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.

Devon Energy Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.1550.59911.60660.80230.99641.08760.75090.70370.9691.4602
GMI 0.99510.97461.12960.95761.00761.05811.02860.71311.0560.9651
AQI 0.92050.98761.18450.8780.73010.94910.92231.03361.39471.0631
SGI 1.16331.21970.57841.24021.15140.83011.09431.9850.63690.9279
DEPI 0.95130.72781.2571.12921.07490.89161.04811.06260.59431.4145
SGAI 1.11081.03091.73710.70060.90241.42490.81486.2561.49070.9091
LVGI 0.87631.23341.03250.78511.21111.07981.02120.91361.67420.9454
TATA -0.0745-0.3708-0.0226-0.0251-0.0367-0.1183-0.1266-0.0839-0.6722-0.1808
M-score -2.56-4.52-2.37-2.50-2.67-3.21-3.20-3.27-6.14-2.88

Devon Energy Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.92340.70370.3580.51370.65370.9691.18191.31531.29681.4602
GMI 1.04950.72540.70170.86920.99371.39921.38221.14741.04940.8745
AQI 1.1861.03360.91161.04241.11081.39471.25851.19341.09011.0631
SGI 1.56431.9851.66061.40431.06980.63690.5950.58240.67720.9279
DEPI 1.1171.06260.69680.66550.62760.59430.80590.89011.14841.4145
SGAI 1.532412.608412.22921.60281.17090.98121.02881.4981.25691.0126
LVGI 1.0190.91360.95541.16861.36511.67421.47691.4821.19120.9454
TATA -0.0802-0.0839-0.1857-0.2725-0.4524-0.6722-0.6195-0.5738-0.3811-0.1808
M-score -2.41-4.36-5.50-4.09-5.00-5.87-5.45-5.35-4.31-2.94
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