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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.
During the past 8 years, the highest Beneish M-Score of Guidewire Software Inc was 0.47. The lowest was -3.10. And the median was -2.50.
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 * 0.8914||+||0.528 * 0.9702||+||0.404 * 1.6069||+||0.892 * 1.1389||+||0.115 * 0.8191|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0613||+||4.679 * -0.0971||-||0.327 * 1.1363|
|This Year (Oct16) TTM:||Last Year (Oct15) TTM:|
|Accounts Receivable was $55.1 Mil.|
Revenue was 94.127 + 141.177 + 98.86 + 102.129 = $436.3 Mil.
Gross Profit was 52.108 + 98.421 + 59.853 + 67.228 = $277.6 Mil.
Total Current Assets was $605.5 Mil.
Total Assets was $903.4 Mil.
Property, Plant and Equipment(Net PPE) was $13.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $10.1 Mil.
Selling, General & Admin. Expense(SGA) was $152.9 Mil.
Total Current Liabilities was $100.1 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was -7.858 + 16.097 + -0.404 + 0.913 = $8.7 Mil.
Non Operating Income was -0.681 + -0.344 + 0.804 + -1.182 = $-1.4 Mil.
Cash Flow from Operations was -12.91 + 49.259 + 23.611 + 37.92 = $97.9 Mil.
|Accounts Receivable was $54.3 Mil.
Revenue was 82.28 + 125.917 + 85.44 + 89.446 = $383.1 Mil.
Gross Profit was 47.11 + 86.488 + 47.536 + 55.366 = $236.5 Mil.
Total Current Assets was $619.1 Mil.
Total Assets was $786.9 Mil.
Property, Plant and Equipment(Net PPE) was $13.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $7.5 Mil.
Selling, General & Admin. Expense(SGA) was $126.5 Mil.
Total Current Liabilities was $76.7 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)|
|=||(55.132 / 436.293)||/||(54.303 / 383.083)|
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)|
|=||(236.5 / 383.083)||/||(277.61 / 436.293)|
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 - (605.493 + 13.01) / 903.394)||/||(1 - (619.082 + 13.418) / 786.932)|
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))|
|=||(7.498 / (7.498 + 13.418))||/||(10.125 / (10.125 + 13.01))|
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)|
|=||(152.938 / 436.293)||/||(126.53 / 383.083)|
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 + 100.07) / 903.394)||/||((0 + 76.711) / 786.932)|
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|
|=||(8.748 - -1.403||-||97.88)||/||903.394|
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 -2.76 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