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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
-2.63 (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 -2.63 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: -2.63

-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 -2.73.


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 * 1.0062+0.404 * 1.5444+0.892 * 1.0701+0.115 * 1.0144
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0476+4.679 * -0.0867-0.327 * 1.085
=-2.63

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

This Year (Oct16) TTM:Last Year (Oct15) TTM:
Accounts Receivable was $0 Mil.
Revenue was 15739 + 18260 + 15234 + 13236 = $62,469 Mil.
Gross Profit was 5407 + 6288 + 5337 + 4588 = $21,620 Mil.
Total Current Assets was $12,728 Mil.
Total Assets was $35,370 Mil.
Property, Plant and Equipment(Net PPE) was $20,037 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,585 Mil.
Selling, General & Admin. Expense(SGA) was $15,136 Mil.
Total Current Liabilities was $12,633 Mil.
Long-Term Debt was $14,395 Mil.
Net Income was 379 + 1167 + 884 + 11 = $2,441 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 641 + 1408 + 3220 + 238 = $5,507 Mil.
Accounts Receivable was $0 Mil.
Revenue was 14360 + 17348 + 14129 + 12541 = $58,378 Mil.
Gross Profit was 4990 + 5981 + 5012 + 4347 = $20,330 Mil.
Total Current Assets was $12,395 Mil.
Total Assets was $33,655 Mil.
Property, Plant and Equipment(Net PPE) was $19,655 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,579 Mil.
Selling, General & Admin. Expense(SGA) was $13,502 Mil.
Total Current Liabilities was $12,162 Mil.
Long-Term Debt was $11,541 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 / 62469) / (0 / 58378)
=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)
=(20330 / 58378) / (21620 / 62469)
=0.34824763 / 0.34609166
=1.0062

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 - (12728 + 20037) / 35370) / (1 - (12395 + 19655) / 33655)
=0.07364999 / 0.04768979
=1.5444

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
=62469 / 58378
=1.0701

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))
=(1579 / (1579 + 19655)) / (1585 / (1585 + 20037))
=0.07436187 / 0.07330497
=1.0144

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)
=(15136 / 62469) / (13502 / 58378)
=0.24229618 / 0.23128576
=1.0476

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)
=((14395 + 12633) / 35370) / ((11541 + 12162) / 33655)
=0.76415041 / 0.70429357
=1.085

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
=(2441 - 0 - 5507) / 35370
=-0.0867

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 -2.63 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

Jan07Jan08Jan09Jan10Jan11Jan12Jan13Jan14Jan15Jan16
DSRI 0111111111
GMI 0.99090.99641.01260.98130.99231.01681.00760.99160.99430.999
AQI 0.86061.5340.82071.07312.0790.92720.95151.13791.18260.6233
SGI 1.08521.02890.99890.97911.03381.02851.00621.05731.05251.0507
DEPI 0.98650.95440.93840.95571.00961.05640.95431.00740.95070.9783
SGAI 0.99481.04781.051.07270.98951.01980.96630.99380.98081.0115
LVGI 1.03311.10340.89450.93231.12551.09761.15211.13061.09671.1093
TATA -0.0503-0.0498-0.0591-0.0688-0.0545-0.0748-0.0552-0.0556-0.0703-0.0716
M-score -3.63-2.52-2.80-2.80-2.31-2.85-2.80-2.68-2.73-2.96

Lowe's Companies Inc Quarterly Data

Jul14Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16
DSRI 1111111111
GMI 0.98920.99180.99430.99921.00150.9990.99891.00191.00161.0062
AQI 1.11920.99151.18261.13391.11740.94250.62330.6071.36611.5444
SGI 1.0521.04811.05261.05991.05641.05481.05071.05671.05881.0701
DEPI 0.97790.9710.95070.97020.97990.98450.97830.981.02751.0144
SGAI 0.9980.99430.98080.97370.97420.97261.01170.99721.0051.0476
LVGI 1.10271.11011.09671.11211.13331.10911.10931.1271.11021.085
TATA -0.0666-0.0661-0.0782-0.085-0.079-0.0649-0.0716-0.0745-0.0672-0.0867
M-score -2.74-2.79-2.76-2.81-2.79-2.79-2.96-2.98-2.63-2.63
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