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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 6 years, the highest Beneish M-Score of Guidewire Software Inc was 0.47. The lowest was -2.95. And the median was -2.02.
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 * 0.9336||+||0.528 * 0.8918||+||0.404 * 0.5404||+||0.892 * 1.1722||+||0.115 * 0.8757|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0351||+||4.679 * -0.0604||-||0.327 * 1.0412|
|This Year (Jan15) TTM:||Last Year (Jan14) TTM:|
|Accounts Receivable was $61.8 Mil.|
Revenue was 89.446 + 79.734 + 118.207 + 82.035 = $369.4 Mil.
Gross Profit was 55.366 + 43.963 + 85.243 + 44.693 = $229.3 Mil.
Total Current Assets was $628.5 Mil.
Total Assets was $749.0 Mil.
Property, Plant and Equipment(Net PPE) was $12.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $7.2 Mil.
Selling, General & Admin. Expense(SGA) was $109.8 Mil.
Total Current Liabilities was $84.1 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 3.976 + -2.997 + 27.586 + -1.358 = $27.2 Mil.
Non Operating Income was -0.861 + -0.483 + -0.198 + 0.19 = $-1.4 Mil.
Cash Flow from Operations was 9.615 + -5.548 + 49.438 + 20.324 = $73.8 Mil.
|Accounts Receivable was $56.5 Mil.
Revenue was 83.475 + 66.529 + 96.91 + 68.25 = $315.2 Mil.
Gross Profit was 47.308 + 28.672 + 66.196 + 32.258 = $174.4 Mil.
Total Current Assets was $512.3 Mil.
Total Assets was $716.3 Mil.
Property, Plant and Equipment(Net PPE) was $12.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $6.0 Mil.
Selling, General & Admin. Expense(SGA) was $90.5 Mil.
Total Current Liabilities was $77.3 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)|
|=||(61.797 / 369.422)||/||(56.471 / 315.164)|
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)|
|=||(43.963 / 315.164)||/||(55.366 / 369.422)|
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 - (628.517 + 12.372) / 749.02)||/||(1 - (512.279 + 12.651) / 716.291)|
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))|
|=||(5.984 / (5.984 + 12.651))||/||(7.164 / (7.164 + 12.372))|
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)|
|=||(109.758 / 369.422)||/||(90.466 / 315.164)|
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 + 84.149) / 749.02)||/||((0 + 77.291) / 716.291)|
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|
|=||(27.207 - -1.352||-||73.829)||/||749.02|
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 -2.95 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