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GuruFocus has detected 3 Warning Signs with Alphabet Inc $GOOG.
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Alphabet Inc (NAS:GOOG)
Beneish M-Score
-2.72 (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.

Alphabet Inc has a M-score of -2.72 suggests that the company is not a manipulator.

GOOG' s Beneish M-Score Range Over the Past 10 Years
Min: -2.89   Max: -0.06
Current: -2.72

-2.89
-0.06

During the past 13 years, the highest Beneish M-Score of Alphabet Inc was -0.06. The lowest was -2.89. And the median was -2.58.


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 Alphabet 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 * 1.0162+0.528 * 1.0224+0.404 * 0.8656+0.892 * 1.2038+0.115 * 0.9764
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9558+4.679 * -0.0949-0.327 * 0.855
=-2.72

* 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 $14,137 Mil.
Revenue was 26064 + 22451 + 21500 + 20257 = $90,272 Mil.
Gross Profit was 15403 + 13752 + 13370 + 12609 = $55,134 Mil.
Total Current Assets was $105,408 Mil.
Total Assets was $167,497 Mil.
Property, Plant and Equipment(Net PPE) was $34,234 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,144 Mil.
Selling, General & Admin. Expense(SGA) was $17,470 Mil.
Total Current Liabilities was $16,756 Mil.
Long-Term Debt was $3,935 Mil.
Net Income was 5333 + 5061 + 4877 + 4207 = $19,478 Mil.
Non Operating Income was -74 + -11 + -124 + -453 = $-662 Mil.
Cash Flow from Operations was 9413 + 9845 + 9120 + 7658 = $36,036 Mil.
Accounts Receivable was $11,556 Mil.
Revenue was 21329 + 18675 + 17727 + 17258 = $74,989 Mil.
Gross Profit was 13141 + 11638 + 11144 + 10902 = $46,825 Mil.
Total Current Assets was $90,114 Mil.
Total Assets was $147,461 Mil.
Property, Plant and Equipment(Net PPE) was $29,016 Mil.
Depreciation, Depletion and Amortization(DDA) was $5,063 Mil.
Selling, General & Admin. Expense(SGA) was $15,183 Mil.
Total Current Liabilities was $19,310 Mil.
Long-Term Debt was $1,995 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)
=(14137 / 90272) / (11556 / 74989)
=0.15660448 / 0.1541026
=1.0162

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)
=(46825 / 74989) / (55134 / 90272)
=0.62442492 / 0.61075417
=1.0224

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 - (105408 + 34234) / 167497) / (1 - (90114 + 29016) / 147461)
=0.16630149 / 0.19212538
=0.8656

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
=90272 / 74989
=1.2038

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))
=(5063 / (5063 + 29016)) / (6144 / (6144 + 34234))
=0.14856657 / 0.15216207
=0.9764

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)
=(17470 / 90272) / (15183 / 74989)
=0.19352623 / 0.2024697
=0.9558

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)
=((3935 + 16756) / 167497) / ((1995 + 19310) / 147461)
=0.12353057 / 0.14447888
=0.855

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
=(19478 - -662 - 36036) / 167497
=-0.0949

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.

Alphabet Inc has a M-score of -2.72 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.

Alphabet Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.04510.93021.10841.07920.98731.19620.93410.88861.0841.0162
GMI 1.00380.99150.96550.97110.98871.04011.03820.98870.97811.0224
AQI 0.96171.26490.80040.92080.95441.62810.84641.06370.93140.8656
SGI 1.56471.31351.08511.23971.29281.21461.20591.18881.13621.2038
DEPI 0.99740.86770.93091.56920.94360.80831.03861.11581.16120.9764
SGAI 1.09371.04150.89771.05161.18821.00721.01831.07060.95570.9558
LVGI 1.13770.90190.9362.54730.94891.12650.88560.94680.93290.855
TATA -0.0632-0.0774-0.0651-0.0418-0.0642-0.0629-0.0517-0.0697-0.0652-0.0949
M-score -2.31-2.51-2.68-2.89-2.58-2.19-2.60-2.70-2.58-2.72

Alphabet Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.8190.88860.93750.98661.0491.0841.09621.05911.03091.0162
GMI 1.03990.98870.98540.98590.97020.97810.9890.99631.01151.0224
AQI 0.96611.06371.03460.99970.98320.93140.92280.93240.92830.8656
SGI 1.26971.18881.16991.14421.12831.13621.14961.17451.19191.2038
DEPI 1.1161.11581.12871.08851.24611.16121.11931.08580.97560.9764
SGAI 1.06081.07061.0521.03111.00790.95570.92490.92340.93340.9558
LVGI 1.05710.94680.78650.84410.8430.93290.99780.88760.80550.855
TATA -0.0686-0.0691-0.082-0.0846-0.0737-0.0652-0.0631-0.068-0.0822-0.0949
M-score -2.74-2.70-2.69-2.71-2.61-2.58-2.56-2.56-2.62-2.72
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