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GuruFocus has detected 3 Warning Signs with Newell Brands Inc $NWL.
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Newell Brands Inc (NYSE:NWL)
Beneish M-Score
-1.27 (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.

Newell Brands Inc has a M-score of -1.27 signals that the company is a manipulator.

NWL' s Beneish M-Score Range Over the Past 10 Years
Min: -3.42   Max: -1.27
Current: -1.27

-3.42
-1.27

During the past 13 years, the highest Beneish M-Score of Newell Brands Inc was -1.27. The lowest was -3.42. 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 Newell Brands 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 * 0.9795+0.528 * 1.1747+0.404 * 1.2774+0.892 * 2.2422+0.115 * 1.0085
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8843+4.679 * -0.042-0.327 * 0.7178
=-1.27

* 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 $2,747 Mil.
Revenue was 4135.9 + 3954.6 + 3858.6 + 1314.9 = $13,264 Mil.
Gross Profit was 1522.7 + 1274.8 + 1095.7 + 505.6 = $4,399 Mil.
Total Current Assets was $7,485 Mil.
Total Assets was $33,838 Mil.
Property, Plant and Equipment(Net PPE) was $1,543 Mil.
Depreciation, Depletion and Amortization(DDA) was $437 Mil.
Selling, General & Admin. Expense(SGA) was $3,224 Mil.
Total Current Liabilities was $4,292 Mil.
Long-Term Debt was $11,291 Mil.
Net Income was 165.6 + 186.5 + 135.2 + 40.5 = $528 Mil.
Non Operating Income was 3.3 + 0.7 + 159.3 + -44.4 = $119 Mil.
Cash Flow from Operations was 991.5 + 511.4 + 596.5 + -270.9 = $1,829 Mil.
Accounts Receivable was $1,251 Mil.
Revenue was 1560.8 + 1530 + 1560.9 + 1264 = $5,916 Mil.
Gross Profit was 597.2 + 598.9 + 621 + 487.5 = $2,305 Mil.
Total Current Assets was $2,494 Mil.
Total Assets was $7,260 Mil.
Property, Plant and Equipment(Net PPE) was $599 Mil.
Depreciation, Depletion and Amortization(DDA) was $172 Mil.
Selling, General & Admin. Expense(SGA) was $1,626 Mil.
Total Current Liabilities was $1,989 Mil.
Long-Term Debt was $2,669 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)
=(2746.9 / 13264) / (1250.7 / 5915.7)
=0.20709439 / 0.21142046
=0.9795

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)
=(2304.6 / 5915.7) / (4398.8 / 13264)
=0.38957351 / 0.3316345
=1.1747

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 - (7484.5 + 1543.4) / 33837.5) / (1 - (2493.5 + 599.2) / 7259.5)
=0.73319837 / 0.57397892
=1.2774

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
=13264 / 5915.7
=2.2422

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))
=(171.6 / (171.6 + 599.2)) / (437.2 / (437.2 + 1543.4))
=0.22262584 / 0.22074119
=1.0085

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)
=(3223.8 / 13264) / (1626 / 5915.7)
=0.24304885 / 0.27486181
=0.8843

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)
=((11290.9 + 4292) / 33837.5) / ((2669.1 + 1988.6) / 7259.5)
=0.46052161 / 0.64160066
=0.7178

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
=(527.8 - 118.9 - 1828.5) / 33837.5
=-0.042

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.

Newell Brands Inc has a M-score of -1.27 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.

Newell Brands Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.01370.82291.07011.10021.03081.11080.9761.10580.970.9795
GMI 0.94761.07360.8930.96760.99621.00281.00310.9850.98761.1747
AQI 1.02261.10911.02811.02490.96120.96990.98091.05821.01481.2774
SGI 1.03331.00990.8621.01450.97410.99941.01791.02141.03292.2422
DEPI 1.00540.90810.96860.94661.08351.00230.99411.04230.98041.0085
SGAI 1.02811.03991.06121.03821.00850.98740.97961.08151.01830.8843
LVGI 0.9181.13850.91710.99090.96730.93511.02161.12481.060.7178
TATA -0.0271-0.066-0.0484-0.0123-0.0678-0.0334-0.0185-0.0265-0.0044-0.042
M-score -2.56-2.92-2.80-2.45-2.79-2.52-2.58-2.52-2.52-1.27

Newell Brands Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.07491.11371.0531.02610.97430.971.09181.55721.30250.9795
GMI 0.98780.98980.98180.98180.98760.98760.99341.14381.19391.1747
AQI 1.02911.05821.01941.00950.97981.01480.50231.4031.3671.2774
SGI 1.01961.01421.02781.03321.03791.03291.03291.41621.81762.2422
DEPI 1.03861.04231.01640.98771.01710.98041.02442.21451.18581.0085
SGAI 1.0461.07261.07411.07941.04941.01831.00460.96850.93930.8843
LVGI 1.12271.12481.16651.14951.0981.061.33250.75810.75040.7178
TATA -0.0203-0.022-0.0183-0.0218-0.0204-0.00440.0075-0.0164-0.0199-0.042
M-score -2.53-2.50-2.56-2.60-2.62-2.52-2.64-1.21-1.20-1.27
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