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GuruFocus has detected 3 Warning Signs with McCormick & Co Inc $MKC.
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McCormick & Co Inc (NYSE:MKC)
Beneish M-Score
-2.69 (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.

McCormick & Co Inc has a M-score of -2.69 suggests that the company is not a manipulator.

MKC' s Beneish M-Score Range Over the Past 10 Years
Min: -3.03   Max: -2.11
Current: -2.69

-3.03
-2.11

During the past 13 years, the highest Beneish M-Score of McCormick & Co Inc was -2.11. The lowest was -3.03. 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 McCormick & Co 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 * 0.9953+0.528 * 0.9739+0.404 * 0.9833+0.892 * 1.0268+0.115 * 1.0466
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.015+4.679 * -0.0413-0.327 * 1.0434
=-2.69

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

This Year (Nov16) TTM:Last Year (Nov15) TTM:
Accounts Receivable was $465 Mil.
Revenue was 1227 + 1091 + 1063.3 + 1030.2 = $4,412 Mil.
Gross Profit was 540 + 453.9 + 432.8 + 405 = $1,832 Mil.
Total Current Assets was $1,422 Mil.
Total Assets was $4,636 Mil.
Property, Plant and Equipment(Net PPE) was $669 Mil.
Depreciation, Depletion and Amortization(DDA) was $109 Mil.
Selling, General & Admin. Expense(SGA) was $1,175 Mil.
Total Current Liabilities was $1,423 Mil.
Long-Term Debt was $1,054 Mil.
Net Income was 155.3 + 127.8 + 93.8 + 94.1 = $471 Mil.
Non Operating Income was 2.2 + 0.2 + 0.7 + 1.1 = $4 Mil.
Cash Flow from Operations was 335.7 + 109.7 + 134.8 + 77.9 = $658 Mil.
Accounts Receivable was $455 Mil.
Revenue was 1201.9 + 1059.9 + 1024.1 + 1010.4 = $4,296 Mil.
Gross Profit was 521.7 + 421.9 + 404 + 389.7 = $1,737 Mil.
Total Current Assets was $1,357 Mil.
Total Assets was $4,473 Mil.
Property, Plant and Equipment(Net PPE) was $618 Mil.
Depreciation, Depletion and Amortization(DDA) was $106 Mil.
Selling, General & Admin. Expense(SGA) was $1,127 Mil.
Total Current Liabilities was $1,239 Mil.
Long-Term Debt was $1,051 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)
=(465.2 / 4411.5) / (455.2 / 4296.3)
=0.10545166 / 0.10595163
=0.9953

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)
=(1737.3 / 4296.3) / (1831.7 / 4411.5)
=0.4043712 / 0.41521025
=0.9739

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 - (1421.8 + 669.4) / 4635.9) / (1 - (1357.4 + 618.4) / 4472.6)
=0.54891175 / 0.55824353
=0.9833

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
=4411.5 / 4296.3
=1.0268

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))
=(105.9 / (105.9 + 618.4)) / (108.7 / (108.7 + 669.4))
=0.14621013 / 0.13969927
=1.0466

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)
=(1175 / 4411.5) / (1127.4 / 4296.3)
=0.26634931 / 0.26241184
=1.015

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)
=((1054 + 1422.7) / 4635.9) / ((1051.4 + 1238.6) / 4472.6)
=0.53424362 / 0.51200644
=1.0434

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
=(471 - 4.2 - 658.1) / 4635.9
=-0.0413

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.

McCormick & Co Inc has a M-score of -2.69 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.

McCormick & Co Inc Annual Data

Nov07Nov08Nov09Nov10Nov11Nov12Nov13Nov14Nov15Nov16
DSRI 1.12170.76560.95491.01270.99651.0051.03540.9680.91080.9953
GMI 1.0041.00780.97540.97861.03191.02170.99760.99081.00840.9739
AQI 1.01171.17731.02310.98471.02260.97761.00440.96471.02870.9833
SGI 1.07361.08931.00491.04531.10811.08561.02721.02911.01251.0268
DEPI 1.05080.92520.96980.98991.0311.00041.01831.06660.99581.0466
SGAI 0.97280.99050.96771.02590.97630.97491.00681.01430.99241.015
LVGI 0.97911.15790.83860.94471.04810.95410.9911.03421.05811.0434
TATA -0.0011-0.0238-0.0349-0.00570.0076-0.0119-0.0173-0.0146-0.0423-0.0413
M-score -2.28-2.71-2.63-2.46-2.33-2.43-2.50-2.58-2.75-2.69

McCormick & Co Inc Quarterly Data

Aug14Nov14Feb15May15Aug15Nov15Feb16May16Aug16Nov16
DSRI 0.9970.9680.8810.92820.88110.91080.95390.99851.02450.9953
GMI 0.98620.99080.99931.00541.00941.00840.99910.98920.97580.9739
AQI 0.99420.96470.96880.97491.01291.02871.02521.01090.98240.9833
SGI 1.03431.02911.01861.00891.00671.01251.01311.02461.02771.0268
DEPI 1.0091.06661.06351.0741.04740.99580.98691.02731.02271.0466
SGAI 11.01421.00910.99871.00960.99240.99711.01431.01021.015
LVGI 0.98231.03421.05491.07041.05291.05811.01071.02141.03281.0434
TATA -0.0205-0.0146-0.0226-0.0182-0.0321-0.0423-0.0341-0.0402-0.0283-0.0413
M-score -2.55-2.58-2.70-2.64-2.74-2.75-2.67-2.66-2.59-2.69
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