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GuruFocus has detected 2 Warning Signs with Office Depot Inc $ODP.
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Office Depot Inc (NAS:ODP)
Beneish M-Score
-2.31 (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.

Office Depot Inc has a M-score of -2.31 suggests that the company is not a manipulator.

ODP' s Beneish M-Score Range Over the Past 10 Years
Min: -4.7   Max: 1.46
Current: -2.31

-4.7
1.46

During the past 13 years, the highest Beneish M-Score of Office Depot Inc was 1.46. The lowest was -4.70. And the median was -2.44.


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 Office Depot 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 * 0.9811+0.528 * 1.0051+0.404 * 1.3314+0.892 * 0.9387+0.115 * 1.1907
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0039+4.679 * 0.0092-0.327 * 0.8845
=-2.31

* 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 $687 Mil.
Revenue was 2726 + 2836 + 3218 + 3544 = $12,324 Mil.
Gross Profit was 654 + 726 + 747 + 856 = $2,983 Mil.
Total Current Assets was $2,973 Mil.
Total Assets was $5,540 Mil.
Property, Plant and Equipment(Net PPE) was $601 Mil.
Depreciation, Depletion and Amortization(DDA) was $181 Mil.
Selling, General & Admin. Expense(SGA) was $2,583 Mil.
Total Current Liabilities was $2,031 Mil.
Long-Term Debt was $1,156 Mil.
Net Income was 229 + 44 + 210 + 46 = $529 Mil.
Non Operating Income was 0 + -14 + 0 + 0 = $-14 Mil.
Cash Flow from Operations was 45 + 299 + 287 + -139 = $492 Mil.
Accounts Receivable was $746 Mil.
Revenue was 2766 + 3046 + 3440 + 3877 = $13,129 Mil.
Gross Profit was 656 + 787 + 814 + 937 = $3,194 Mil.
Total Current Assets was $4,060 Mil.
Total Assets was $6,442 Mil.
Property, Plant and Equipment(Net PPE) was $665 Mil.
Depreciation, Depletion and Amortization(DDA) was $253 Mil.
Selling, General & Admin. Expense(SGA) was $2,741 Mil.
Total Current Liabilities was $2,743 Mil.
Long-Term Debt was $1,447 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)
=(687 / 12324) / (746 / 13129)
=0.05574489 / 0.05682078
=0.9811

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)
=(3194 / 13129) / (2983 / 12324)
=0.24327824 / 0.24204804
=1.0051

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 - (2973 + 601) / 5540) / (1 - (4060 + 665) / 6442)
=0.35487365 / 0.26653213
=1.3314

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
=12324 / 13129
=0.9387

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))
=(253 / (253 + 665)) / (181 / (181 + 601))
=0.27559913 / 0.2314578
=1.1907

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)
=(2583 / 12324) / (2741 / 13129)
=0.20959104 / 0.20877447
=1.0039

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)
=((1156 + 2031) / 5540) / ((1447 + 2743) / 6442)
=0.57527076 / 0.65041912
=0.8845

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
=(529 - -14 - 492) / 5540
=0.0092

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.

Office Depot Inc has a M-score of -2.31 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.

Office Depot Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.98720.88981.06570.89740.90651.00091.57740.83870.63970.9799
GMI 1.06761.04940.98930.96791.22570.9931.0150.99760.95910.9936
AQI 1.04370.41530.74381.01261.22961.10372.07551.03851.0831.3314
SGI 1.03440.93350.83780.95790.98760.9311.0511.13060.92270.9398
DEPI 1.08841.07250.940.97810.92420.86131.39230.61630.81061.1907
SGAI 0.9861.08161.06590.96120.78871.00650.99820.97230.9341.0048
LVGI 0.91391.2751.00461.03990.96480.99510.94891.08730.99910.8845
TATA -0.0061-0.3741-0.1861-0.0618-0.0318-0.0696-0.0413-0.0664-0.02030.0092
M-score -2.40-4.70-3.56-2.92-2.47-2.84-1.59-2.88-2.97-2.32

Office Depot Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.07990.83860.96361.08451.37120.57140.88050.84710.510.9811
GMI 1.01090.99780.97730.97050.95860.96240.97370.98691.00731.0051
AQI 5.60111.03851.05221.05961.00861.0831.04050.99131.27611.3314
SGI 1.51751.13070.950.82750.68631.03291.04591.06261.14380.9387
DEPI 0.87070.61630.71830.80530.99890.81060.99651.10390.92711.1907
SGAI 0.99020.9720.97750.91840.92870.9430.95930.99861.00841.0039
LVGI 1.0051.08731.05311.00381.01140.99910.98560.95950.92920.8845
TATA -0.0646-0.0666-0.0495-0.0305-0.0331-0.0205-0.0061-0.0233-0.03330.0092
M-score -0.40-2.88-2.83-2.70-2.58-2.94-2.56-2.66-2.83-2.31
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