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GuruFocus has detected 3 Warning Signs with Garmin Ltd $GRMN.
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Garmin Ltd (NAS:GRMN)
Beneish M-Score
-2.65 (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.

Garmin Ltd has a M-score of -2.65 suggests that the company is not a manipulator.

GRMN' s Beneish M-Score Range Over the Past 10 Years
Min: -2.91   Max: -1.19
Current: -2.65

-2.91
-1.19

During the past 13 years, the highest Beneish M-Score of Garmin Ltd was -1.19. The lowest was -2.91. 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 Garmin Ltd 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 * 0.9265+0.528 * 0.9806+0.404 * 0.9603+0.892 * 1.0703+0.115 * 0.985
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9769+4.679 * -0.037-0.327 * 0.8987
=-2.65

* 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 $527 Mil.
Revenue was 860.767 + 722.25 + 811.609 + 624.04 = $3,019 Mil.
Gross Profit was 470.782 + 405.98 + 462.958 + 339.85 = $1,680 Mil.
Total Current Assets was $2,263 Mil.
Total Assets was $4,525 Mil.
Property, Plant and Equipment(Net PPE) was $483 Mil.
Depreciation, Depletion and Amortization(DDA) was $86 Mil.
Selling, General & Admin. Expense(SGA) was $588 Mil.
Total Current Liabilities was $783 Mil.
Long-Term Debt was $0 Mil.
Net Income was 136.605 + 125.054 + 161.064 + 88.092 = $511 Mil.
Non Operating Income was -0.556 + -18.077 + -5.328 + -3.684 = $-28 Mil.
Cash Flow from Operations was 213.316 + 212.994 + 149.985 + 129.387 = $706 Mil.
Accounts Receivable was $531 Mil.
Revenue was 781.357 + 679.69 + 773.83 + 585.394 = $2,820 Mil.
Gross Profit was 413.143 + 362.19 + 419.25 + 344.122 = $1,539 Mil.
Total Current Assets was $2,211 Mil.
Total Assets was $4,499 Mil.
Property, Plant and Equipment(Net PPE) was $446 Mil.
Depreciation, Depletion and Amortization(DDA) was $78 Mil.
Selling, General & Admin. Expense(SGA) was $562 Mil.
Total Current Liabilities was $866 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)
=(527.062 / 3018.666) / (531.481 / 2820.271)
=0.17460097 / 0.18845033
=0.9265

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)
=(1538.705 / 2820.271) / (1679.57 / 3018.666)
=0.54558764 / 0.55639478
=0.9806

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 - (2263.016 + 482.878) / 4525.133) / (1 - (2211.087 + 446.089) / 4499.391)
=0.39319043 / 0.40943652
=0.9603

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
=3018.666 / 2820.271
=1.0703

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))
=(78.36 / (78.36 + 446.089)) / (86.34 / (86.34 + 482.878))
=0.14941396 / 0.15168178
=0.985

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)
=(587.701 / 3018.666) / (562.081 / 2820.271)
=0.19468898 / 0.19930035
=0.9769

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 + 782.735) / 4525.133) / ((0 + 865.998) / 4499.391)
=0.17297503 / 0.19247005
=0.8987

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
=(510.815 - -27.645 - 705.682) / 4525.133
=-0.037

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.

Garmin Ltd has a M-score of -2.65 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.

Garmin Ltd Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.31670.70841.39830.93640.79271.00950.9650.92590.94880.9265
GMI 1.08111.03480.90720.97921.03150.91610.99060.95671.02440.9806
AQI 0.70640.96861.50451.0291.24251.17480.98540.97421.09720.9603
SGI 1.79271.09870.84330.91291.02550.98450.96911.09070.98241.0703
DEPI 1.030.97590.83470.99030.98051.02161.13291.05281.01490.985
SGAI 1.0311.11431.02541.12851.09641.06240.95031.01531.10310.9769
LVGI 1.36760.67031.09720.93621.14440.98270.98361.18660.87420.8987
TATA 0.0437-0.05-0.1018-0.0258-0.0669-0.0265-0.0127-0.03320.0417-0.037
M-score -1.47-2.80-2.63-2.74-2.91-2.59-2.58-2.71-2.27-2.65

Garmin Ltd Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.940.92590.930.97340.89750.94880.96391.00671.03280.9265
GMI 0.94650.95670.96770.99241.0131.02441.04921.01890.99240.9806
AQI 0.95470.97420.86650.99981.00621.09721.17461.0751.05180.9603
SGI 1.07061.09071.07071.03781.00540.98240.99521.00971.03411.0703
DEPI 1.21951.05281.02541.01880.951.01491.00070.96681.00070.985
SGAI 0.9641.01531.04561.08881.11331.10311.06681.02890.98980.9769
LVGI 1.19141.18661.23331.06360.84730.87420.85081.02650.98280.8987
TATA -0.0456-0.0332-0.03580.0080.05950.04170.0276-0.0216-0.0254-0.037
M-score -2.76-2.71-2.80-2.47-2.26-2.27-2.25-2.54-2.51-2.65
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