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GuruFocus has detected 2 Warning Signs with Finisar Corp $FNSR.
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Finisar Corp (NAS:FNSR)
Beneish M-Score
-2.50 (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.

Finisar Corp has a M-score of -2.50 suggests that the company is not a manipulator.

FNSR' s Beneish M-Score Range Over the Past 10 Years
Min: -10.57   Max: 140.18
Current: -2.5

-10.57
140.18

During the past 13 years, the highest Beneish M-Score of Finisar Corp was 140.18. The lowest was -10.57. And the median was -2.94.


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 Finisar 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 * 1.3416+0.528 * 0.8685+0.404 * 0.8349+0.892 * 1.0616+0.115 * 0.9834
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9489+4.679 * -0.0563-0.327 * 0.9833
=-2.50

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Oct16) TTM:Last Year (Oct15) TTM:
Accounts Receivable was $328 Mil.
Revenue was 369.863 + 341.325 + 318.794 + 309.206 = $1,339 Mil.
Gross Profit was 133.681 + 108.165 + 90.442 + 87.74 = $420 Mil.
Total Current Assets was $1,264 Mil.
Total Assets was $1,750 Mil.
Property, Plant and Equipment(Net PPE) was $342 Mil.
Depreciation, Depletion and Amortization(DDA) was $95 Mil.
Selling, General & Admin. Expense(SGA) was $107 Mil.
Total Current Liabilities was $253 Mil.
Long-Term Debt was $235 Mil.
Net Income was 48.766 + 23.949 + 13.072 + 12.084 = $98 Mil.
Non Operating Income was 0.795 + -0.059 + -0.081 + 1.968 = $3 Mil.
Cash Flow from Operations was 60.141 + 47.404 + 54.603 + 31.665 = $194 Mil.
Accounts Receivable was $230 Mil.
Revenue was 321.136 + 314.03 + 320.042 + 306.283 = $1,261 Mil.
Gross Profit was 89.091 + 87.377 + 89.218 + 77.953 = $344 Mil.
Total Current Assets was $1,076 Mil.
Total Assets was $1,577 Mil.
Property, Plant and Equipment(Net PPE) was $345 Mil.
Depreciation, Depletion and Amortization(DDA) was $94 Mil.
Selling, General & Admin. Expense(SGA) was $107 Mil.
Total Current Liabilities was $221 Mil.
Long-Term Debt was $226 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)
=(327.664 / 1339.188) / (230.065 / 1261.491)
=0.24467364 / 0.18237546
=1.3416

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)
=(343.639 / 1261.491) / (420.028 / 1339.188)
=0.27240702 / 0.31364379
=0.8685

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 - (1263.525 + 341.563) / 1750.064) / (1 - (1076.061 + 344.695) / 1577.254)
=0.0828404 / 0.09922181
=0.8349

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
=1339.188 / 1261.491
=1.0616

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))
=(93.958 / (93.958 + 344.695)) / (95.113 / (95.113 + 341.563))
=0.21419664 / 0.21781138
=0.9834

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)
=(107.365 / 1339.188) / (106.583 / 1261.491)
=0.08017172 / 0.0844897
=0.9489

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)
=((234.679 + 252.79) / 1750.064) / ((226.151 + 220.639) / 1577.254)
=0.27854353 / 0.2832708
=0.9833

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
=(97.871 - 2.623 - 193.813) / 1750.064
=-0.0563

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.

Finisar Corp has a M-score of -2.50 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.

Finisar Corp Annual Data

Apr07Apr08Apr09Apr10Apr11Apr12Apr13Apr14Apr15Apr16
DSRI 0.85580.88051.34641.20680.8561.03810.80811.39690.90731.1462
GMI 0.77191.05731.15130.97860.8671.1471.04310.80161.22340.9991
AQI 0.94140.7280.48940.49851.13231.91310.91820.81331.03870.8241
SGI 1.14891.05171.12921.26721.50631.0040.98081.23811.08141.0098
DEPI 1.28621.02010.96651.09241.15251.00651.05791.18250.90471.057
SGAI 0.97581.06350.70110.83790.80430.97461.11760.91891.10340.888
LVGI 1.01541.16990.93240.64930.45360.90481.01441.69750.89821.025
TATA -0.0768-0.2405-0.68380.04670.0076-0.0356-0.15210.0036-0.0682-0.0921
M-score -2.95-3.81-5.30-1.89-1.91-2.13-3.41-2.26-2.67-2.82

Finisar Corp Quarterly Data

Jul14Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16
DSRI 1.06440.97190.8460.90730.99441.0451.12381.14620.88731.3416
GMI 0.89351.00851.16041.22341.20991.1571.03620.99910.9430.8685
AQI 0.86160.92391.11181.03871.02150.92240.90180.82410.80720.8349
SGI 1.24341.17921.13041.08141.01551.03011.02221.00981.04291.0616
DEPI 1.16641.04210.94670.90470.89060.9891.04411.0571.03330.9834
SGAI 1.021.14031.15961.10341.10010.87060.89410.8880.8760.9489
LVGI 1.57191.41870.89040.89820.92250.95981.02821.0250.98090.9833
TATA -0.0059-0.0061-0.0418-0.0682-0.0817-0.1043-0.0914-0.0921-0.0857-0.0563
M-score -2.51-2.56-2.57-2.67-2.74-2.81-2.78-2.82-3.02-2.50
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