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GuruFocus has detected 4 Warning Signs with EarthLink Holdings Corp $ELNK.
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EarthLink Holdings Corp (NAS:ELNK)
Beneish M-Score
-3.65 (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.

EarthLink Holdings Corp has a M-score of -3.65 suggests that the company is not a manipulator.

ELNK' s Beneish M-Score Range Over the Past 10 Years
Min: -5.97   Max: 1.09
Current: -3.65

-5.97
1.09

During the past 13 years, the highest Beneish M-Score of EarthLink Holdings Corp was 1.09. The lowest was -5.97. And the median was -3.01.


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 EarthLink Holdings 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 * 0.9695+0.528 * 1.0126+0.404 * 0.9535+0.892 * 0.8827+0.115 * 1.0693
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9652+4.679 * -0.2225-0.327 * 0.9933
=-3.65

* 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 $70.9 Mil.
Revenue was 235.125 + 240.357 + 254.262 + 260.237 = $990.0 Mil.
Gross Profit was 125.585 + 129.423 + 139.056 + 138.51 = $532.6 Mil.
Total Current Assets was $153.4 Mil.
Total Assets was $643.6 Mil.
Property, Plant and Equipment(Net PPE) was $333.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $153.2 Mil.
Selling, General & Admin. Expense(SGA) was $325.8 Mil.
Total Current Liabilities was $148.9 Mil.
Long-Term Debt was $438.1 Mil.
Net Income was 0.23 + 4.115 + 7.867 + -12.282 = $-0.1 Mil.
Non Operating Income was -0.964 + -0.226 + 5.495 + -0.993 = $3.3 Mil.
Cash Flow from Operations was 47.522 + 40.308 + 10.63 + 41.359 = $139.8 Mil.
Accounts Receivable was $82.9 Mil.
Revenue was 270.904 + 283.664 + 282.447 + 284.472 = $1,121.5 Mil.
Gross Profit was 148.513 + 156.616 + 152.985 + 152.795 = $610.9 Mil.
Total Current Assets was $199.0 Mil.
Total Assets was $768.0 Mil.
Property, Plant and Equipment(Net PPE) was $372.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $189.2 Mil.
Selling, General & Admin. Expense(SGA) was $382.4 Mil.
Total Current Liabilities was $197.9 Mil.
Long-Term Debt was $507.3 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)
=(70.92 / 989.981) / (82.864 / 1121.487)
=0.07163774 / 0.07388762
=0.9695

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)
=(610.909 / 1121.487) / (532.574 / 989.981)
=0.54473124 / 0.53796386
=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 - (153.449 + 333.507) / 643.64) / (1 - (199.006 + 372.948) / 768.026)
=0.24343422 / 0.25529344
=0.9535

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
=989.981 / 1121.487
=0.8827

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))
=(189.175 / (189.175 + 372.948)) / (153.165 / (153.165 + 333.507))
=0.33653667 / 0.31471915
=1.0693

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)
=(325.774 / 989.981) / (382.371 / 1121.487)
=0.32907096 / 0.34095001
=0.9652

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)
=((438.109 + 148.937) / 643.64) / ((507.335 + 197.861) / 768.026)
=0.91207197 / 0.91819287
=0.9933

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
=(-0.07 - 3.312 - 139.819) / 643.64
=-0.2225

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.

EarthLink Holdings Corp has a M-score of -3.65 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.

EarthLink Holdings Corp Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 1.41670.86940.93770.8883.40660.91180.95720.96190.96860.8654
GMI 1.06351.0481.02190.98321.01611.12631.05111.02020.97990.968
AQI 1.38651.08440.63460.81121.63811.30470.99530.62680.83820.8772
SGI 1.00850.93460.78580.75740.85972.09021.02660.92920.94860.9323
DEPI 1.20960.66650.98411.24.65350.30370.95711.03230.93280.9407
SGAI 1.04940.88090.6530.8920.9341.06611.05131.06861.03670.9439
LVGI 1.78851.20380.66690.74271.62481.07971.00161.5261.10041.0495
TATA -0.0267-0.1457-0.06470.0743-0.0485-0.0662-0.114-0.6558-0.2366-0.2721
M-score -2.27-3.37-3.00-2.41-0.12-1.83-3.02-5.97-3.78-4.02

EarthLink Holdings Corp Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
DSRI 1.02221.04220.96860.97140.85520.83640.86540.92330.95230.9696
GMI 1.01551.00920.97990.96140.94630.95050.9680.98051.00411.0126
AQI 0.6920.62130.83820.87650.87960.90430.87720.85080.83540.9535
SGI 0.93440.94220.94860.95160.95290.93910.93230.920.89330.8827
DEPI 0.93770.93570.93280.94160.93980.92670.94070.94461.00151.0693
SGAI 1.06351.04411.03671.0060.98030.96340.94390.9460.95040.9652
LVGI 1.38631.36991.10041.08121.05621.06141.04951.01561.0060.9933
TATA -0.4874-0.4943-0.2366-0.2253-0.2381-0.2712-0.2721-0.2718-0.27-0.2225
M-score -5.06-5.09-3.78-3.71-3.87-4.04-4.02-3.97-3.94-3.65
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