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Netflix Inc (NAS:NFLX)
Beneish M-Score
-1.13 (As of Today)

Warning Sign:

Beneish M-Score -1.13 higher than -2.22, which implies that it might have manipulated its financial results.

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.

Netflix Inc has a M-score of -1.13 signals that the company is a manipulator.

NFLX' s Beneish M-Score Range Over the Past 10 Years
Min: -4.46   Max: -1.13
Current: -1.13

-4.46
-1.13

During the past 13 years, the highest Beneish M-Score of Netflix Inc was -1.13. The lowest was -4.46. 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 Netflix 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 * 1.037+0.404 * 1.3423+0.892 * 1.2695+0.115 * 4.707
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9753+4.679 * 0.1073-0.327 * 0.9491
=-1.13

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

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $0 Mil.
Revenue was 2290.188 + 2105.204 + 1957.736 + 1823.333 = $8,176 Mil.
Gross Profit was 757.344 + 632.106 + 588.196 + 573.968 = $2,552 Mil.
Total Current Assets was $5,194 Mil.
Total Assets was $12,347 Mil.
Property, Plant and Equipment(Net PPE) was $192 Mil.
Depreciation, Depletion and Amortization(DDA) was $59 Mil.
Selling, General & Admin. Expense(SGA) was $1,458 Mil.
Total Current Liabilities was $4,411 Mil.
Long-Term Debt was $2,374 Mil.
Net Income was 51.517 + 40.755 + 27.658 + 43.178 = $163 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was -461.941 + -226.293 + -228.59 + -244.745 = $-1,162 Mil.
Accounts Receivable was $0 Mil.
Revenue was 1738.355 + 1644.694 + 1573.129 + 1484.728 = $6,441 Mil.
Gross Profit was 564.397 + 522.942 + 526.728 + 470.396 = $2,084 Mil.
Total Current Assets was $5,570 Mil.
Total Assets was $9,916 Mil.
Property, Plant and Equipment(Net PPE) was $181 Mil.
Depreciation, Depletion and Amortization(DDA) was $-1,916 Mil.
Selling, General & Admin. Expense(SGA) was $1,178 Mil.
Total Current Liabilities was $3,341 Mil.
Long-Term Debt was $2,400 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 / 8176.461) / (0 / 6440.906)
=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)
=(2084.463 / 6440.906) / (2551.614 / 8176.461)
=0.32362885 / 0.31206827
=1.037

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 - (5193.893 + 191.876) / 12347.338) / (1 - (5569.713 + 181.268) / 9916.267)
=0.56381133 / 0.42004577
=1.3423

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
=8176.461 / 6440.906
=1.2695

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))
=(-1916.132 / (-1916.132 + 181.268)) / (58.827 / (58.827 + 191.876))
=1.10448542 / 0.23464817
=4.707

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)
=(1458.095 / 8176.461) / (1177.68 / 6440.906)
=0.17832837 / 0.18284384
=0.9753

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)
=((2373.966 + 4411.405) / 12347.338) / ((2400 + 3341.418) / 9916.267)
=0.5495412 / 0.57898986
=0.9491

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
=(163.108 - 0 - -1161.569) / 12347.338
=0.1073

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.

Netflix Inc has a M-score of -1.13 signals that the company is likely to 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.

Netflix Inc Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 1111111111
GMI 0.85531.06661.04430.94110.95031.02451.37040.92270.90310.9861
AQI 0.92591.35280.77040.94341.09211.63041.11991.02021.02661.0701
SGI 1.46091.20941.13221.22391.29481.48181.12631.2121.25831.2316
DEPI 0.98360.9931.12812.94260.98070.94110.26173.49181.00321.0027
SGAI 0.99480.85570.81330.94710.95730.99750.96940.92781.07171.1402
LVGI 0.84221.14671.13271.65390.8780.88340.89291.03721.02771.1477
TATA -0.3265-0.329-0.3266-0.3078-0.1177-0.0298-0.00110.00730.03550.0855
M-score -3.65-3.68-3.96-3.76-2.71-1.89-2.17-2.00-2.14-1.92

Netflix Inc Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
DSRI 1111111111
GMI 0.88470.86270.90310.91790.94140.97310.98611.02971.04461.037
AQI 0.99971.05591.02660.99981.01131.0131.07011.28121.29621.3423
SGI 1.24041.25351.25831.25691.24951.23981.23161.23361.24751.2695
DEPI 1.39761.26231.00320.40510.57720.67691.00274.98254.30114.707
SGAI 0.96481.03021.07171.1351.23341.23111.14021.070.99380.9753
LVGI 1.05591.0241.02771.1191.13821.1381.14770.95660.9520.9491
TATA 0.00570.020.03550.04160.05980.07120.08550.08680.08940.1073
M-score -2.27-2.19-2.14-2.23-2.14-2.06-1.92-1.28-1.30-1.13
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