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Netflix Inc (NAS:NFLX)
Beneish M-Score
-2.22 (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.

Netflix Inc has a M-score of -2.22 suggests that the company is not a manipulator.

NFLX' s 10-Year Beneish M-Score Range
Min: -6.57   Max: -1.82
Current: -2.22

-6.57
-1.82

During the past 13 years, the highest Beneish M-Score of Netflix Inc was -1.82. The lowest was -6.57. And the median was -3.57.


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 * 0.8648+0.404 * 1.0559+0.892 * 1.2535+0.115 * 0.9956
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0304+4.679 * 0.0204-0.327 * 1.024
=-2.22

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Sep14) TTM:Last Year (Sep13) TTM:
Accounts Receivable was $0 Mil.
Revenue was 1409.432 + 1340.407 + 1270.089 + 1175.23 = $5,195 Mil.
Gross Profit was 455.038 + 425.559 + 400.903 + 388.5 = $1,670 Mil.
Total Current Assets was $3,823 Mil.
Total Assets was $6,778 Mil.
Property, Plant and Equipment(Net PPE) was $144 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,620 Mil.
Selling, General & Admin. Expense(SGA) was $806 Mil.
Total Current Liabilities was $2,549 Mil.
Long-Term Debt was $900 Mil.
Net Income was 59.295 + 71.018 + 53.115 + 48.421 = $232 Mil.
Non Operating Income was 0 + 0 + 0 + -3.002 = $-3 Mil.
Cash Flow from Operations was -37.439 + 56.024 + 36.359 + 41.445 = $96 Mil.
Accounts Receivable was $0 Mil.
Revenue was 1105.999 + 1069.372 + 1023.961 + 945.239 = $4,145 Mil.
Gross Profit was 307.099 + 308.698 + 287.009 + 249.372 = $1,152 Mil.
Total Current Assets was $2,849 Mil.
Total Assets was $4,901 Mil.
Property, Plant and Equipment(Net PPE) was $127 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,131 Mil.
Selling, General & Admin. Expense(SGA) was $624 Mil.
Total Current Liabilities was $1,935 Mil.
Long-Term Debt was $500 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 / 5195.158) / (0 / 4144.571)
=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)
=(425.559 / 4144.571) / (455.038 / 5195.158)
=0.27799693 / 0.32145317
=0.8648

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 - (3823.482 + 144.147) / 6778.329) / (1 - (2849.278 + 127.263) / 4901.325)
=0.41465972 / 0.39270687
=1.0559

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
=5195.158 / 4144.571
=1.2535

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))
=(2130.82 / (2130.82 + 127.263)) / (2620.23 / (2620.23 + 144.147))
=0.94364113 / 0.94785552
=0.9956

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)
=(805.537 / 5195.158) / (623.701 / 4144.571)
=0.15505534 / 0.15048626
=1.0304

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)
=((900 + 2548.655) / 6778.329) / ((500 + 1935.136) / 4901.325)
=0.50877657 / 0.49683218
=1.024

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
=(231.849 - -3.002 - 96.389) / 6778.329
=0.0204

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 -2.22 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 own currency.

Netflix Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 1111111111
GMI 1.34871.06340.85531.06661.04430.94110.95031.02451.33390.923
AQI 1.17091.21990.92591.35280.77040.94341.07321.65911.11991.0202
SGI 1.83881.36281.46091.20941.13221.22391.29481.48181.12631.212
DEPI 1.01741.13490.98360.9931.12810.99690.91290.84260.92680.9835
SGAI 0.65691.07730.99480.85570.81330.94710.95730.99751.01330.934
LVGI 1.0521.00090.84221.14671.13271.65390.92890.8350.89291.0372
TATA -0.5013-0.3221-0.3344-0.3498-0.3266-0.3078-0.1177-0.0298-0.00110.0079
M-score -3.78-3.54-3.69-3.78-3.96-3.98-2.74-1.87-2.12-2.29

Netflix Inc Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 1111111111
GMI 1.19931.2511.33391.2371.13021.05130.9230.89520.88630.8648
AQI 1.18251.19031.11991.03411.1381.03141.02021.00150.99971.0559
SGI 1.30121.21021.12631.12151.1411.17091.2121.22781.24041.2535
DEPI 0.85670.8850.92680.95720.97220.97440.98350.98750.9930.9956
SGAI 1.0521.12231.01330.94720.91120.86670.9340.9650.96831.0304
LVGI 0.89350.85730.89291.03180.88720.9471.03720.95551.05591.024
TATA -0.0196-0.0185-0.00460.01360.01520.01110.00790.00320.00610.0204
M-score -2.11-2.16-2.14-2.18-2.11-2.20-2.29-2.30-2.31-2.22
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