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GuruFocus has detected 4 Warning Signs with Lowe's Companies Inc $LOW.
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Lowe's Companies Inc (NYSE:LOW)
Beneish M-Score
-2.36 (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.

Lowe's Companies Inc has a M-score of -2.36 suggests that the company is not a manipulator.

LOW' s Beneish M-Score Range Over the Past 10 Years
Min: -3.63   Max: -1.74
Current: -2.36

-3.63
-1.74

During the past 13 years, the highest Beneish M-Score of Lowe's Companies Inc was -1.74. The lowest was -3.63. And the median was -2.71.


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 Lowe's Companies 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+0.528 * 1.0079+0.404 * 1.9809+0.892 * 1.1006+0.115 * 1.0158
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9745+4.679 * -0.0734-0.327 * 1.0873
=-2.36

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Jan17) TTM:Last Year (Jan16) TTM:
Accounts Receivable was $0 Mil.
Revenue was 15784 + 15739 + 18260 + 15234 = $65,017 Mil.
Gross Profit was 5432 + 5407 + 6288 + 5337 = $22,464 Mil.
Total Current Assets was $12,000 Mil.
Total Assets was $34,408 Mil.
Property, Plant and Equipment(Net PPE) was $19,949 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,590 Mil.
Selling, General & Admin. Expense(SGA) was $15,130 Mil.
Total Current Liabilities was $11,974 Mil.
Long-Term Debt was $14,394 Mil.
Net Income was 663 + 379 + 1167 + 884 = $3,093 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 348 + 641 + 1408 + 3220 = $5,617 Mil.
Accounts Receivable was $0 Mil.
Revenue was 13236 + 14360 + 17348 + 14129 = $59,073 Mil.
Gross Profit was 4588 + 4990 + 5981 + 5012 = $20,571 Mil.
Total Current Assets was $10,561 Mil.
Total Assets was $31,266 Mil.
Property, Plant and Equipment(Net PPE) was $19,577 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,587 Mil.
Selling, General & Admin. Expense(SGA) was $14,107 Mil.
Total Current Liabilities was $10,492 Mil.
Long-Term Debt was $11,545 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)
=(0 / 65017) / (0 / 59073)
=0 / 0
=1

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)
=(20571 / 59073) / (22464 / 65017)
=0.34823016 / 0.34550964
=1.0079

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 - (12000 + 19949) / 34408) / (1 - (10561 + 19577) / 31266)
=0.07146594 / 0.03607753
=1.9809

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
=65017 / 59073
=1.1006

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))
=(1587 / (1587 + 19577)) / (1590 / (1590 + 19949))
=0.07498582 / 0.07381958
=1.0158

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)
=(15130 / 65017) / (14107 / 59073)
=0.23270837 / 0.23880622
=0.9745

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)
=((14394 + 11974) / 34408) / ((11545 + 10492) / 31266)
=0.76633341 / 0.70482313
=1.0873

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
=(3093 - 0 - 5617) / 34408
=-0.0734

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.

Lowe's Companies Inc has a M-score of -2.36 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.

Lowe's Companies Inc Annual Data

Jan08Jan09Jan10Jan11Jan12Jan13Jan14Jan15Jan16Jan17
DSRI 1111111111
GMI 0.99641.01260.98130.99231.01681.00760.99160.99430.9991.0078
AQI 1.5340.82071.07312.0790.92720.95151.13791.18260.62331.9809
SGI 1.02890.99890.97911.03381.02851.00621.05731.05251.05071.1006
DEPI 0.95440.93840.95571.00961.05640.95431.00740.95070.97831.0158
SGAI 1.04781.051.07270.98951.01980.96630.99380.98011.01150.9746
LVGI 1.10340.89450.93231.12551.09761.15211.13061.09671.10931.0873
TATA -0.0498-0.0591-0.0688-0.0545-0.0748-0.0552-0.0556-0.0703-0.0716-0.0734
M-score -2.52-2.80-2.80-2.31-2.85-2.80-2.68-2.73-2.96-2.36

Lowe's Companies Inc Quarterly Data

Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17
DSRI 1111111111
GMI 0.99180.99430.99921.00150.9990.99891.00191.00161.00621.0079
AQI 0.99151.18261.13391.11740.94250.62330.6071.36611.54441.9809
SGI 1.04811.05261.05991.05641.05481.05071.05671.05881.07011.1006
DEPI 0.9710.95070.97020.97990.98450.97830.981.02751.01441.0158
SGAI 0.99430.98010.9730.97350.9721.01170.99721.0051.04760.9745
LVGI 1.11011.09671.11211.13331.10911.10931.1271.11021.0851.0873
TATA -0.0661-0.0782-0.085-0.079-0.0649-0.0716-0.0745-0.0672-0.0867-0.0734
M-score -2.79-2.76-2.81-2.79-2.79-2.96-2.98-2.63-2.63-2.36
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