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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.
Guidewire Software Inc has a M-score of -2.50 suggests that the company is not a manipulator.
During the past 6 years, the highest Beneish M-Score of Guidewire Software Inc was 0.47. The lowest was -2.50. And the median was -1.02.
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 Guidewire Software 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 * 1.0464||+||0.528 * 1.0128||+||0.404 * 1.1143||+||0.892 * 1.165||+||0.115 * 0.7795|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1133||+||4.679 * -0.0805||-||0.327 * 0.5149|
|This Year (Jul14) TTM:||Last Year (Jul13) TTM:|
|Accounts Receivable was $49.8 Mil.|
Revenue was 118.207 + 82.035 + 83.475 + 66.529 = $350.2 Mil.
Gross Profit was 85.243 + 44.693 + 44.754 + 26.609 = $201.3 Mil.
Total Current Assets was $516.4 Mil.
Total Assets was $757.2 Mil.
Property, Plant and Equipment(Net PPE) was $12.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $6.8 Mil.
Selling, General & Admin. Expense(SGA) was $106.7 Mil.
Total Current Liabilities was $95.4 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 27.586 + -1.358 + -0.892 + -10.615 = $14.7 Mil.
Non Operating Income was -0.198 + 0.19 + -0.022 + 0.204 = $0.2 Mil.
Cash Flow from Operations was 49.438 + 20.324 + 20.312 + -14.583 = $75.5 Mil.
|Accounts Receivable was $40.9 Mil.
Revenue was 96.91 + 68.25 + 72.188 + 63.301 = $300.6 Mil.
Gross Profit was 66.196 + 32.258 + 40.8 + 35.744 = $175.0 Mil.
Total Current Assets was $210.1 Mil.
Total Assets was $305.7 Mil.
Property, Plant and Equipment(Net PPE) was $12.9 Mil.
Depreciation, Depletion and Amortization(DDA) was $4.8 Mil.
Selling, General & Admin. Expense(SGA) was $82.3 Mil.
Total Current Liabilities was $74.8 Mil.
Long-Term Debt was $0.0 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(49.839 / 350.246)||/||(40.885 / 300.649)|
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.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(44.693 / 300.649)||/||(85.243 / 350.246)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (516.43 + 12.607) / 757.227)||/||(1 - (210.093 + 12.914) / 305.673)|
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.
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))|
|=||(4.821 / (4.821 + 12.914))||/||(6.751 / (6.751 + 12.607))|
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)|
|=||(106.699 / 350.246)||/||(82.268 / 300.649)|
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 + 95.386) / 757.227)||/||((0 + 74.784) / 305.673)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(14.721 - 0.174||-||75.491)||/||757.227|
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.
Guidewire Software Inc has a M-score of -2.50 suggests that the company will not be a manipulator.
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
Guidewire Software Inc Annual Data
Guidewire Software Inc Quarterly Data