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GuruFocus has detected 6 Warning Signs with MercadoLibre Inc $MELI.
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MercadoLibre Inc (NAS:MELI)
Beneish M-Score
-2.66 (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.

MercadoLibre Inc has a M-score of -2.66 suggests that the company is not a manipulator.

MELI' s Beneish M-Score Range Over the Past 10 Years
Min: -3.31   Max: 6.5
Current: -2.66

-3.31
6.5

During the past 13 years, the highest Beneish M-Score of MercadoLibre Inc was 6.50. The lowest was -3.31. And the median was -2.45.


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 MercadoLibre 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 * 0.7645+0.528 * 1.054+0.404 * 0.7279+0.892 * 1.2955+0.115 * 1.1692
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9175+4.679 * -0.0353-0.327 * 1.0454
=-2.66

* 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 $30.6 Mil.
Revenue was 256.275 + 230.847 + 199.644 + 157.63 = $844.4 Mil.
Gross Profit was 162.73 + 145.648 + 126.298 + 102.182 = $536.9 Mil.
Total Current Assets was $869.5 Mil.
Total Assets was $1,367.4 Mil.
Property, Plant and Equipment(Net PPE) was $124.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $29.0 Mil.
Selling, General & Admin. Expense(SGA) was $243.6 Mil.
Total Current Liabilities was $576.6 Mil.
Long-Term Debt was $301.9 Mil.
Net Income was 51.349 + 38.912 + 15.858 + 30.247 = $136.4 Mil.
Non Operating Income was -0.503 + -4.823 + -5.387 + 5.147 = $-5.6 Mil.
Cash Flow from Operations was 42.577 + 102.827 + 56.657 + -11.802 = $190.3 Mil.
Accounts Receivable was $30.9 Mil.
Revenue was 180.732 + 168.641 + 154.314 + 148.103 = $651.8 Mil.
Gross Profit was 117.57 + 111.828 + 104.003 + 103.395 = $436.8 Mil.
Total Current Assets was $545.2 Mil.
Total Assets was $1,003.6 Mil.
Property, Plant and Equipment(Net PPE) was $81.6 Mil.
Depreciation, Depletion and Amortization(DDA) was $23.2 Mil.
Selling, General & Admin. Expense(SGA) was $205.0 Mil.
Total Current Liabilities was $322.5 Mil.
Long-Term Debt was $294.3 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)
=(30.582 / 844.396) / (30.878 / 651.79)
=0.0362176 / 0.04737415
=0.7645

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)
=(436.796 / 651.79) / (536.858 / 844.396)
=0.67014836 / 0.63578937
=1.054

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 - (869.461 + 124.261) / 1367.435) / (1 - (545.173 + 81.633) / 1003.606)
=0.27329489 / 0.37544614
=0.7279

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
=844.396 / 651.79
=1.2955

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))
=(23.209 / (23.209 + 81.633)) / (29.022 / (29.022 + 124.261))
=0.22137121 / 0.18933606
=1.1692

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)
=(243.605 / 844.396) / (204.951 / 651.79)
=0.28849616 / 0.3144433
=0.9175

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)
=((301.94 + 576.601) / 1367.435) / ((294.342 + 322.475) / 1003.606)
=0.64247368 / 0.61460075
=1.0454

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
=(136.366 - -5.566 - 190.259) / 1367.435
=-0.0353

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.

MercadoLibre Inc has a M-score of -2.66 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.

MercadoLibre Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 9.98410.11861.11031.72991.57090.39031.03151.53120.56490.7645
GMI 0.97770.98291.00891.00861.03461.02911.01751.01461.06591.054
AQI 0.46663.06010.89661.05460.64230.98650.6581.55661.05970.7279
SGI 1.63521.60961.26141.25381.37941.24981.2651.17761.17121.2955
DEPI 1.13940.99480.9092.06911.00360.99292.31420.53090.70561.1692
SGAI 0.79230.9840.84250.92520.94360.90410.99860.99771.00580.9175
LVGI 0.58291.22690.88920.99791.01651.05221.05841.55381.03381.0454
TATA 0.0672-0.2265-0.0758-0.0438-0.0423-0.0804-0.0443-0.126-0.1263-0.0353
M-score 6.63-3.06-2.48-1.62-1.94-3.19-2.42-2.42-3.31-2.66

MercadoLibre Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.62531.53120.52580.40450.36350.56490.77670.75180.46870.7645
GMI 1.00541.01461.02561.04361.05411.06591.07471.07381.07041.054
AQI 1.00831.55661.45881.78861.11191.05971.12020.82990.88590.7279
SGI 1.19941.17761.21431.21151.19371.17121.12231.15521.21571.2955
DEPI 0.77850.53090.45840.7260.7580.70560.91881.01081.13721.1692
SGAI 0.93040.99770.99521.02131.0381.00581.03710.98620.97860.9175
LVGI 1.55741.55381.5891.04771.0251.03381.00911.01811.02591.0454
TATA -0.0784-0.126-0.1528-0.1155-0.063-0.1262-0.0571-0.0516-0.1166-0.0353
M-score -2.28-2.42-3.50-3.09-3.16-3.31-2.77-2.84-3.32-2.66
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