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GuruFocus has detected 2 Warning Signs with First Solar Inc $FSLR.
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First Solar Inc (NAS:FSLR)
Beneish M-Score
-3.42 (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.

First Solar Inc has a M-score of -3.42 suggests that the company is not a manipulator.

FSLR' s Beneish M-Score Range Over the Past 10 Years
Min: -3.42   Max: 0.47
Current: -3.42

-3.42
0.47

During the past 13 years, the highest Beneish M-Score of First Solar Inc was 0.47. The lowest was -3.42. And the median was -1.70.


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 First Solar 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 * 0.646+0.528 * 1.0768+0.404 * 0.823+0.892 * 0.8246+0.115 * 0.8932
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1726+4.679 * -0.0861-0.327 * 0.9318
=-3.42

* 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 $267 Mil.
Revenue was 480.434 + 688.029 + 934.381 + 848.484 = $2,951 Mil.
Gross Profit was 63.589 + 186.28 + 191.165 + 262.945 = $704 Mil.
Total Current Assets was $3,787 Mil.
Total Assets was $6,867 Mil.
Property, Plant and Equipment(Net PPE) was $1,078 Mil.
Depreciation, Depletion and Amortization(DDA) was $231 Mil.
Selling, General & Admin. Expense(SGA) was $263 Mil.
Total Current Liabilities was $900 Mil.
Long-Term Debt was $160 Mil.
Net Income was -696.083 + 154.146 + 13.408 + 170.565 = $-358 Mil.
Non Operating Income was -14.221 + 4.123 + 4.03 + 32.313 = $26 Mil.
Cash Flow from Operations was 307.326 + -75.792 + -75.275 + 50.494 = $207 Mil.
Accounts Receivable was $501 Mil.
Revenue was 942.324 + 1271.245 + 896.217 + 469.209 = $3,579 Mil.
Gross Profit was 231.438 + 484.365 + 164.483 + 38.981 = $919 Mil.
Total Current Assets was $3,346 Mil.
Total Assets was $7,316 Mil.
Property, Plant and Equipment(Net PPE) was $1,378 Mil.
Depreciation, Depletion and Amortization(DDA) was $258 Mil.
Selling, General & Admin. Expense(SGA) was $272 Mil.
Total Current Liabilities was $961 Mil.
Long-Term Debt was $251 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)
=(266.687 / 2951.328) / (500.629 / 3578.995)
=0.09036169 / 0.13987977
=0.646

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)
=(919.267 / 3578.995) / (703.979 / 2951.328)
=0.2568506 / 0.23852957
=1.0768

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 - (3786.62 + 1077.743) / 6867.213) / (1 - (3345.586 + 1377.877) / 7316.331)
=0.29165398 / 0.35439457
=0.823

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
=2951.328 / 3578.995
=0.8246

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))
=(257.825 / (257.825 + 1377.877)) / (230.94 / (230.94 + 1077.743))
=0.15762345 / 0.17646749
=0.8932

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)
=(263.015 / 2951.328) / (272.01 / 3578.995)
=0.08911751 / 0.07600178
=1.1726

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)
=((160.422 + 899.707) / 6867.213) / ((251.325 + 960.8) / 7316.331)
=0.15437544 / 0.16567389
=0.9318

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
=(-357.964 - 26.245 - 206.753) / 6867.213
=-0.0861

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.

First Solar Inc has a M-score of -3.42 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.

First Solar Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.1741.37362.21791.09070.93742.5240.70130.2013.50250.646
GMI 0.80560.91641.07671.09381.31571.38770.9691.07390.94711.0768
AQI 5.26190.90933.27671.03410.74891.34370.79011.30721.09410.823
SGI 3.73392.47291.65791.24071.07911.21770.98251.02461.05540.8246
DEPI 1.00270.81630.56921.17830.85770.78051.01521.00810.91080.8932
SGAI 0.58890.84260.83760.95871.2120.53150.96240.92570.99521.1726
LVGI 0.95221.3850.62670.96121.77470.9151.00830.68010.95780.9318
TATA -0.0352-0.0565-0.0111-0.0092-0.0013-0.135-0.0728-0.04960.1208-0.0861
M-score 0.74-1.290.24-2.12-2.71-1.09-3.21-3.140.45-3.42

First Solar Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.61160.20091.72891.57790.60033.50420.76560.86830.60510.646
GMI 1.1881.07151.23021.16660.82360.94930.74850.7341.07011.0768
AQI 1.00081.30721.02371.05441.24021.09411.21971.11861.2280.823
SGI 0.87231.02510.83090.92481.15561.05491.35941.22450.93650.8246
DEPI 0.98181.00810.99220.99430.95480.91080.96471.20230.97180.8932
SGAI 1.05380.92531.2921.29210.97910.99570.71030.69670.96221.1726
LVGI 0.6390.68010.99660.84670.96330.95780.94330.85721.19790.9318
TATA 0.0512-0.0492-0.0596-0.0260.00240.12080.080.07730.059-0.0861
M-score -1.59-3.14-2.16-2.03-2.680.45-1.98-2.01-2.56-3.42
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