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GuruFocus has detected 4 Warning Signs with Mohawk Industries Inc $MHK.
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Mohawk Industries Inc (NYSE:MHK)
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.

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

MHK' s Beneish M-Score Range Over the Past 10 Years
Min: -4.2   Max: -0.63
Current: -2.55

-4.2
-0.63

During the past 13 years, the highest Beneish M-Score of Mohawk Industries Inc was -0.63. The lowest was -4.20. And the median was -2.55.


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 Mohawk Industries 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 * 1.0044+0.528 * 0.9513+0.404 * 0.9303+0.892 * 1.11+0.115 * 0.9538
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8779+4.679 * -0.039-0.327 * 0.8399
=-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 $1,386 Mil.
Revenue was 2182.566 + 2294.139 + 2310.336 + 2172.046 = $8,959 Mil.
Gross Profit was 690.999 + 726.559 + 755.588 + 639.679 = $2,813 Mil.
Total Current Assets was $3,472 Mil.
Total Assets was $10,231 Mil.
Property, Plant and Equipment(Net PPE) was $3,370 Mil.
Depreciation, Depletion and Amortization(DDA) was $409 Mil.
Selling, General & Admin. Expense(SGA) was $1,533 Mil.
Total Current Liabilities was $2,718 Mil.
Long-Term Debt was $1,129 Mil.
Net Income was 233.748 + 269.878 + 255.188 + 171.548 = $930 Mil.
Non Operating Income was 3.19 + -3.839 + 5.807 + -3.429 = $2 Mil.
Cash Flow from Operations was 342.872 + 435.301 + 411.62 + 137.76 = $1,328 Mil.
Accounts Receivable was $1,244 Mil.
Revenue was 1997.997 + 2150.656 + 2041.733 + 1881.177 = $8,072 Mil.
Gross Profit was 622.21 + 661.404 + 615.129 + 511.943 = $2,411 Mil.
Total Current Assets was $3,250 Mil.
Total Assets was $9,934 Mil.
Property, Plant and Equipment(Net PPE) was $3,147 Mil.
Depreciation, Depletion and Amortization(DDA) was $363 Mil.
Selling, General & Admin. Expense(SGA) was $1,573 Mil.
Total Current Liabilities was $3,259 Mil.
Long-Term Debt was $1,189 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)
=(1386.306 / 8959.087) / (1243.533 / 8071.563)
=0.15473742 / 0.15406347
=1.0044

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)
=(2410.686 / 8071.563) / (2812.825 / 8959.087)
=0.29866409 / 0.31396335
=0.9513

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 - (3471.512 + 3370.348) / 10230.596) / (1 - (3249.972 + 3147.118) / 9934.4)
=0.33123544 / 0.3560668
=0.9303

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
=8959.087 / 8071.563
=1.11

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))
=(362.647 / (362.647 + 3147.118)) / (409.467 / (409.467 + 3370.348))
=0.10332515 / 0.10832991
=0.9538

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)
=(1532.882 / 8959.087) / (1573.12 / 8071.563)
=0.17109801 / 0.19489658
=0.8779

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)
=((1128.747 + 2718.32) / 10230.596) / ((1188.964 + 3259.028) / 9934.4)
=0.37603547 / 0.44773635
=0.8399

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
=(930.362 - 1.729 - 1327.553) / 10230.596
=-0.039

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.

Mohawk Industries 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.

Mohawk Industries Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.94030.94231.23640.85841.14090.96741.22640.94581.11161.0044
GMI 1.01241.09511.1040.87441.05010.97540.98490.94680.92430.9513
AQI 1.02910.71980.99391.01160.95210.9680.97470.98551.13390.9303
SGI 0.95950.89990.78290.99531.06081.02581.26971.06191.03441.11
DEPI 0.94671.01070.91830.96711.00981.04281.38460.90511.0970.9538
SGAI 1.02151.07371.15140.92010.95390.9830.97440.94691.1010.8779
LVGI 0.79711.140.98970.91780.96170.92241.18860.99411.10780.8399
TATA -0.0204-0.3123-0.1069-0.0239-0.0182-0.0535-0.0197-0.0144-0.0281-0.039
M-score -2.59-4.20-2.94-2.75-2.35-2.73-2.15-2.58-2.51-2.55

Mohawk Industries Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.92970.94581.02121.14951.06661.11161.150.95581.03211.0044
GMI 0.94790.94680.95060.95170.94130.92430.91440.91150.92840.9513
AQI 0.9360.98550.96521.15811.18841.13391.17610.98780.96160.9303
SGI 1.13351.06191.02561.01521.0321.03441.06241.09741.09341.11
DEPI 0.89160.90510.90850.99951.01261.0971.12640.97951.00080.9538
SGAI 1.00330.92440.99581.03031.02561.1010.94130.93480.90530.8779
LVGI 0.9830.99411.00281.13471.08431.10781.03490.88490.87820.8399
TATA -0.0044-0.0144-0.0248-0.0311-0.0407-0.0281-0.0304-0.0337-0.0325-0.039
M-score -2.51-2.57-2.60-2.49-2.57-2.51-2.39-2.60-2.52-2.55
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