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GuruFocus has detected 4 Warning Signs with Equifax Inc $EFX.
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Equifax Inc (NYSE:EFX)
Beneish M-Score
-2.54 (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.

Equifax Inc has a M-score of -2.54 suggests that the company is not a manipulator.

EFX' s Beneish M-Score Range Over the Past 10 Years
Min: -3.63   Max: -2.3
Current: -2.54

-3.63
-2.3

During the past 13 years, the highest Beneish M-Score of Equifax Inc was -2.30. The lowest was -3.63. And the median was -2.69.


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 Equifax 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 * 1.0492+0.528 * 1.0323+0.404 * 1.0444+0.892 * 1.1807+0.115 * 0.966
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9081+4.679 * -0.0464-0.327 * 1.2975
=-2.54

* 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 $433 Mil.
Revenue was 801.1 + 804.1 + 811.3 + 728.3 = $3,145 Mil.
Gross Profit was 514.8 + 516.1 + 525.5 + 475 = $2,031 Mil.
Total Current Assets was $673 Mil.
Total Assets was $6,664 Mil.
Property, Plant and Equipment(Net PPE) was $467 Mil.
Depreciation, Depletion and Amortization(DDA) was $269 Mil.
Selling, General & Admin. Expense(SGA) was $948 Mil.
Total Current Liabilities was $1,260 Mil.
Long-Term Debt was $2,087 Mil.
Net Income was 123 + 132.8 + 130.9 + 102.1 = $489 Mil.
Non Operating Income was 2.8 + 2.4 + -0.8 + -2.1 = $2 Mil.
Cash Flow from Operations was 271.3 + 245 + 189.2 + 90.3 = $796 Mil.
Accounts Receivable was $350 Mil.
Revenue was 666.3 + 667.4 + 678.1 + 651.8 = $2,664 Mil.
Gross Profit was 441.3 + 440.9 + 457.3 + 436.7 = $1,776 Mil.
Total Current Assets was $562 Mil.
Total Assets was $4,502 Mil.
Property, Plant and Equipment(Net PPE) was $367 Mil.
Depreciation, Depletion and Amortization(DDA) was $200 Mil.
Selling, General & Admin. Expense(SGA) was $884 Mil.
Total Current Liabilities was $604 Mil.
Long-Term Debt was $1,138 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)
=(433.3 / 3144.8) / (349.8 / 2663.6)
=0.13778301 / 0.13132602
=1.0492

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)
=(1776.2 / 2663.6) / (2031.4 / 3144.8)
=0.66684187 / 0.64595523
=1.0323

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 - (672.9 + 466.9) / 6664) / (1 - (561.6 + 366.8) / 4501.5)
=0.82896158 / 0.79375764
=1.0444

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
=3144.8 / 2663.6
=1.1807

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))
=(200 / (200 + 366.8)) / (268.7 / (268.7 + 466.9))
=0.35285815 / 0.36528004
=0.966

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)
=(948.1 / 3144.8) / (884.3 / 2663.6)
=0.30148181 / 0.33199429
=0.9081

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)
=((2086.8 + 1259.6) / 6664) / ((1138.4 + 603.8) / 4501.5)
=0.50216086 / 0.38702655
=1.2975

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
=(488.8 - 2.3 - 795.8) / 6664
=-0.0464

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.

Equifax Inc has a M-score of -2.54 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.

Equifax Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.01380.81561.15160.93671.06371.0180.87911.02960.94891.0491
GMI 1.0051.00191.01670.98270.94130.99140.96261.00760.97971.0323
AQI 1.12410.99740.98630.99310.99961.03960.971.01930.98141.0444
SGI 1.19191.05030.88651.08361.01811.0951.11141.05751.09331.1807
DEPI 1.0260.93741.05920.92280.99930.98560.92030.98171.14640.966
SGAI 0.99821.021.03780.99581.08421.09820.95630.9931.07610.9082
LVGI 1.15080.95040.90470.90421.00141.22470.85971.06060.91631.2975
TATA -0.0494-0.0557-0.0537-0.0254-0.0478-0.0511-0.0455-0.0544-0.071-0.0464
M-score -2.52-2.86-2.66-2.57-2.68-2.70-2.69-2.66-2.76-2.54

Equifax Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.00011.02960.99750.97541.00650.94891.06991.01461.06271.0492
GMI 0.99681.00760.99480.98390.98250.97970.99561.01421.02311.0323
AQI 1.00591.01930.97370.97550.97240.98141.05071.05031.05081.0444
SGI 1.0581.05751.07831.09321.09691.09331.09441.11891.1481.1807
DEPI 0.98230.98170.99451.03721.07431.14641.1731.12291.0470.966
SGAI 0.9430.9931.04711.08221.06691.07611.010.96040.93140.9081
LVGI 1.01311.06061.03181.0530.99570.91631.27331.23791.24751.2975
TATA -0.0523-0.0544-0.0613-0.0617-0.0721-0.071-0.0433-0.0432-0.0379-0.0464
M-score -2.67-2.66-2.73-2.75-2.75-2.76-2.59-2.59-2.50-2.54
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