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GuruFocus has detected 4 Warning Signs with Harley-Davidson Inc $HOG.
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Harley-Davidson Inc (NYSE:HOG)
Beneish M-Score
-2.55 (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.

Harley-Davidson Inc has a M-score of -2.55 suggests that the company is not a manipulator.

HOG' s Beneish M-Score Range Over the Past 10 Years
Min: -3.47   Max: -1.47
Current: -2.55

-3.47
-1.47

During the past 13 years, the highest Beneish M-Score of Harley-Davidson Inc was -1.47. The lowest was -3.47. And the median was -2.61.


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 Harley-Davidson 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 * 1.1522+0.528 * 1.031+0.404 * 1.0088+0.892 * 1.0002+0.115 * 0.9872
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9976+4.679 * -0.0492-0.327 * 1.0017
=-2.55

* 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 $285 Mil.
Revenue was 1110.6 + 1274.813 + 1861.077 + 1749.968 = $5,996 Mil.
Gross Profit was 422.017 + 507.629 + 755.627 + 717.719 = $2,403 Mil.
Total Current Assets was $3,854 Mil.
Total Assets was $9,890 Mil.
Property, Plant and Equipment(Net PPE) was $982 Mil.
Depreciation, Depletion and Amortization(DDA) was $210 Mil.
Selling, General & Admin. Expense(SGA) was $1,217 Mil.
Total Current Liabilities was $2,863 Mil.
Long-Term Debt was $4,667 Mil.
Net Income was 47.179 + 114.065 + 280.431 + 250.489 = $692 Mil.
Non Operating Income was 0.891 + 2.3 + 0.688 + 0.766 = $5 Mil.
Cash Flow from Operations was 246.53 + 471.519 + 415.159 + 41.131 = $1,174 Mil.
Accounts Receivable was $247 Mil.
Revenue was 1180.635 + 1317.43 + 1824.392 + 1672.945 = $5,995 Mil.
Gross Profit was 453.452 + 529.934 + 779.635 + 714.114 = $2,477 Mil.
Total Current Assets was $3,978 Mil.
Total Assets was $9,973 Mil.
Property, Plant and Equipment(Net PPE) was $942 Mil.
Depreciation, Depletion and Amortization(DDA) was $198 Mil.
Selling, General & Admin. Expense(SGA) was $1,220 Mil.
Total Current Liabilities was $2,747 Mil.
Long-Term Debt was $4,832 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)
=(285.106 / 5996.458) / (247.405 / 5995.402)
=0.04754573 / 0.04126579
=1.1522

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)
=(2477.135 / 5995.402) / (2402.992 / 5996.458)
=0.41317246 / 0.40073523
=1.031

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 - (3853.852 + 981.593) / 9890.24) / (1 - (3977.883 + 942.418) / 9972.977)
=0.51108922 / 0.50663668
=1.0088

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
=5996.458 / 5995.402
=1.0002

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))
=(198.074 / (198.074 + 942.418)) / (209.555 / (209.555 + 981.593))
=0.17367417 / 0.17592692
=0.9872

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)
=(1217.439 / 5996.458) / (1220.095 / 5995.402)
=0.20302635 / 0.20350512
=0.9976

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)
=((4666.975 + 2862.562) / 9890.24) / ((4832.469 + 2747.307) / 9972.977)
=0.76130984 / 0.76003143
=1.0017

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
=(692.164 - 4.645 - 1174.339) / 9890.24
=-0.0492

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.

Harley-Davidson Inc has a M-score of -2.55 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.

Harley-Davidson Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.28321.40791.26440.95850.76370.99981.07330.89851.0381.1522
GMI 1.04270.95251.16020.88331.01660.96010.97750.97910.97981.031
AQI 1.15340.79712.68281.13040.92631.05051.03611.01371.02781.0088
SGI 0.98731.03990.8031.01621.09311.05061.05721.05570.96261.0002
DEPI 1.06940.93430.74570.9191.38341.01281.08740.98060.97180.9872
SGAI 1.07791.13191.15051.02520.95120.9970.95740.97651.09320.9976
LVGI 1.14441.2021.1370.9940.97610.9470.98381.02451.17731.0017
TATA 0.02010.1694-0.0648-0.0912-0.0304-0.0194-0.0265-0.0324-0.0355-0.0492
M-score -2.10-1.48-2.05-2.95-2.72-2.51-2.46-2.69-2.72-2.55

Harley-Davidson Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.93280.89850.84630.99911.06211.0381.1311.10361.16721.1522
GMI 0.97410.97910.97250.99060.99250.97981.0021.01881.02011.031
AQI 1.02841.01370.97460.97670.97941.02781.05791.031.03431.0088
SGI 1.05761.05571.01990.95820.96720.96260.98331.01831.00861.0002
DEPI 1.02790.98060.98160.95380.97950.97180.96810.98830.9870.9872
SGAI 0.95430.97651.00751.08251.07211.09321.08121.04491.05380.9976
LVGI 0.98211.02451.06351.08041.1481.17731.15021.12811.05181.0017
TATA -0.0282-0.0322-0.0269-0.0381-0.0395-0.0355-0.0229-0.0226-0.0317-0.0492
M-score -2.61-2.69-2.78-2.76-2.71-2.72-2.52-2.50-2.47-2.55
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