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GuruFocus has detected 3 Warning Signs with F5 Networks Inc $FFIV.
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F5 Networks Inc (NAS:FFIV)
Beneish M-Score
-3.12 (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.

F5 Networks Inc has a M-score of -3.12 suggests that the company is not a manipulator.

FFIV' s Beneish M-Score Range Over the Past 10 Years
Min: -4.04   Max: -0.46
Current: -3.12

-4.04
-0.46

During the past 13 years, the highest Beneish M-Score of F5 Networks Inc was -0.46. The lowest was -4.04. And the median was -2.88.


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 F5 Networks 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 * 1.0804+0.528 * 0.9912+0.404 * 0.8061+0.892 * 1.0385+0.115 * 1.1208
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0053+4.679 * -0.1379-0.327 * 1.106
=-3.12

* 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 $313 Mil.
Revenue was 515.958 + 525.349 + 496.522 + 483.677 = $2,022 Mil.
Gross Profit was 430.696 + 440.4 + 412.179 + 401.447 = $1,685 Mil.
Total Current Assets was $1,427 Mil.
Total Assets was $2,397 Mil.
Property, Plant and Equipment(Net PPE) was $129 Mil.
Depreciation, Depletion and Amortization(DDA) was $58 Mil.
Selling, General & Admin. Expense(SGA) was $782 Mil.
Total Current Liabilities was $919 Mil.
Long-Term Debt was $0 Mil.
Net Income was 94.218 + 108.935 + 91.789 + 75.415 = $370 Mil.
Non Operating Income was 2.643 + 0.268 + 0.978 + 0.133 = $4 Mil.
Cash Flow from Operations was 189.312 + 204.07 + 170.476 + 133.118 = $697 Mil.
Accounts Receivable was $279 Mil.
Revenue was 489.486 + 501.301 + 483.586 + 472.143 = $1,947 Mil.
Gross Profit was 403.803 + 416.643 + 397.927 + 389.547 = $1,608 Mil.
Total Current Assets was $1,208 Mil.
Total Assets was $2,316 Mil.
Property, Plant and Equipment(Net PPE) was $100 Mil.
Depreciation, Depletion and Amortization(DDA) was $53 Mil.
Selling, General & Admin. Expense(SGA) was $749 Mil.
Total Current Liabilities was $803 Mil.
Long-Term Debt was $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)
=(313.211 / 2021.506) / (279.158 / 1946.516)
=0.15493944 / 0.14341418
=1.0804

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)
=(1607.92 / 1946.516) / (1684.722 / 2021.506)
=0.82605024 / 0.83339946
=0.9912

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 - (1427.496 + 128.667) / 2397.095) / (1 - (1208.133 + 99.946) / 2316.081)
=0.35081296 / 0.4352188
=0.8061

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
=2021.506 / 1946.516
=1.0385

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))
=(53.304 / (53.304 + 99.946)) / (57.9 / (57.9 + 128.667))
=0.34782382 / 0.31034427
=1.1208

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)
=(781.657 / 2021.506) / (748.719 / 1946.516)
=0.38667063 / 0.3846457
=1.0053

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)
=((0 + 918.683) / 2397.095) / ((0 + 802.583) / 2316.081)
=0.38324847 / 0.34652631
=1.106

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
=(370.357 - 4.022 - 696.976) / 2397.095
=-0.1379

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.

F5 Networks Inc has a M-score of -3.12 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.

F5 Networks Inc Annual Data

Sep07Sep08Sep09Sep10Sep11Sep12Sep13Sep14Sep15Sep16
DSRI 1.09630.8551.09730.77621.13130.93471.02531.01451.04070.9235
GMI 1.00181.00530.98640.97070.98250.9890.99921.00990.99290.9951
AQI 1.70331.09540.86771.00960.91031.16621.0760.8460.8680.872
SGI 1.3341.23691.00451.35051.3061.19571.07561.16931.10841.0392
DEPI 0.91240.92120.82670.97681.35540.81750.95980.9461.15351.1228
SGAI 1.01161.05440.95230.95510.96160.98931.01290.97111.00171.0002
LVGI 1.18951.22441.04921.00991.12621.02731.01371.17941.12021.1209
TATA -0.128-0.1473-0.1125-0.1249-0.1183-0.1183-0.103-0.1106-0.1418-0.151
M-score -2.48-3.14-3.00-2.97-2.68-2.89-2.85-2.95-3.09-3.30

F5 Networks Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.01450.98651.01660.94761.04071.00240.95270.96370.92351.0804
GMI 1.00991.00340.99950.9970.99290.99640.99640.99520.99510.9912
AQI 0.8460.88310.92980.8180.8680.85160.84680.94050.8720.8061
SGI 1.16931.17481.1561.13341.10841.08841.06391.04631.03921.0385
DEPI 0.9460.95950.97661.08941.15351.19981.25251.16781.12281.1208
SGAI 0.97110.97450.97840.98771.00171.00351.01561.01981.00021.0053
LVGI 1.17941.12211.13811.12871.12021.11411.13651.11851.12091.106
TATA -0.1106-0.112-0.1341-0.1405-0.1418-0.1482-0.1522-0.1513-0.151-0.1379
M-score -2.95-2.95-3.03-3.17-3.09-3.17-3.26-3.23-3.30-3.12
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