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GuruFocus has detected 1 Warning Sign with Edgewater Technology Inc $EDGW.
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Edgewater Technology Inc (NAS:EDGW)
Beneish M-Score
-2.96 (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.

Edgewater Technology Inc has a M-score of -2.96 suggests that the company is not a manipulator.

EDGW' s Beneish M-Score Range Over the Past 10 Years
Min: -6.78   Max: 7757.99
Current: -2.96

-6.78
7757.99

During the past 13 years, the highest Beneish M-Score of Edgewater Technology Inc was 7757.99. The lowest was -6.78. And the median was -2.27.


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 Edgewater Technology 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 * 0.8529+0.528 * 0.9294+0.404 * 0.8927+0.892 * 1.0841+0.115 * 0.7746
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0065+4.679 * -0.0689-0.327 * 0.9733
=-2.96

* 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 $25.7 Mil.
Revenue was 29.774 + 30.826 + 34.024 + 31.898 = $126.5 Mil.
Gross Profit was 11.978 + 10.64 + 12.814 + 10.75 = $46.2 Mil.
Total Current Assets was $46.6 Mil.
Total Assets was $104.8 Mil.
Property, Plant and Equipment(Net PPE) was $0.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $4.2 Mil.
Selling, General & Admin. Expense(SGA) was $37.7 Mil.
Total Current Liabilities was $24.0 Mil.
Long-Term Debt was $5.0 Mil.
Net Income was -3.427 + 0.043 + 1.313 + -0.763 = $-2.8 Mil.
Non Operating Income was -0.566 + -0.568 + -0.568 + -0.625 = $-2.3 Mil.
Cash Flow from Operations was 5.536 + 1.1 + 5.231 + -5.153 = $6.7 Mil.
Accounts Receivable was $27.8 Mil.
Revenue was 28.415 + 31.184 + 30.527 + 26.578 = $116.7 Mil.
Gross Profit was 9.776 + 11.756 + 10.413 + 7.645 = $39.6 Mil.
Total Current Assets was $40.4 Mil.
Total Assets was $107.4 Mil.
Property, Plant and Equipment(Net PPE) was $0.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $1.7 Mil.
Selling, General & Admin. Expense(SGA) was $34.6 Mil.
Total Current Liabilities was $25.6 Mil.
Long-Term Debt was $5.0 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)
=(25.661 / 126.522) / (27.753 / 116.704)
=0.20281848 / 0.23780676
=0.8529

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)
=(39.59 / 116.704) / (46.182 / 126.522)
=0.3392343 / 0.36501162
=0.9294

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 - (46.562 + 0.623) / 104.805) / (1 - (40.438 + 0.824) / 107.424)
=0.54978293 / 0.61589589
=0.8927

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
=126.522 / 116.704
=1.0841

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))
=(1.708 / (1.708 + 0.824)) / (4.202 / (4.202 + 0.623))
=0.67456556 / 0.87088083
=0.7746

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)
=(37.747 / 126.522) / (34.592 / 116.704)
=0.29834337 / 0.29640801
=1.0065

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)
=((5 + 24.031) / 104.805) / ((5 + 25.572) / 107.424)
=0.27700014 / 0.2845919
=0.9733

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
=(-2.834 - -2.327 - 6.714) / 104.805
=-0.0689

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.

Edgewater Technology Inc has a M-score of -2.96 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.

Edgewater Technology Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.27290.68712.27870.60991.03330.79651.05741.13881.08990.8529
GMI 0.9941.05091.21460.88730.9591.08020.96390.9911.07920.9294
AQI 1.27550.60951.34320.63530.87920.92831.88930.86811.44160.8927
SGI 1.13991.07670.67921.76791.1570.98481.02651.09111.03291.0841
DEPI 0.88290.69011.07730.76231.08651.08360.96490.98710.77980.7746
SGAI 0.99971.01131.16690.92970.98640.9280.97641.00080.96951.0065
LVGI 1.0781.28611.85331.36630.99581.00570.56390.99031.47910.9733
TATA 0.0011-0.8163-0.0487-0.4831-0.1048-0.14150.3494-0.0165-0.0496-0.0699
M-score -2.03-6.78-1.86-4.76-2.86-3.31-0.29-2.40-2.56-2.97

Edgewater Technology Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.13931.13881.07621.06891.11771.08991.03950.98820.93240.8529
GMI 0.9310.9911.08321.11871.09141.07920.99320.94450.97810.9294
AQI 1.67250.86811.02991.08281.15841.44161.24751.23991.21550.8927
SGI 1.11211.09111.03951.03891.031.03291.091.10831.08171.0841
DEPI 0.990.98711.0140.95250.87640.77980.66960.67440.70170.7746
SGAI 1.00371.00091.00750.97860.97860.96930.9720.97950.9931.0065
LVGI 0.65830.99031.09491.07331.0441.47911.2991.34781.19760.9733
TATA 0.3015-0.0163-0.0245-0.00490.0128-0.0494-0.0273-0.0592-0.0487-0.0689
M-score -0.50-2.40-2.46-2.33-2.20-2.56-2.53-2.75-2.72-2.96
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