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GuruFocus has detected 4 Warning Signs with Overstock.com Inc $OSTK.
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Overstock.com Inc (NAS:OSTK)
Beneish M-Score
-2.21 (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.

Overstock.com Inc has a M-score of -2.21 signals that the company is a manipulator.

OSTK' s Beneish M-Score Range Over the Past 10 Years
Min: -4.08   Max: 0.11
Current: -2.21

-4.08
0.11

During the past 13 years, the highest Beneish M-Score of Overstock.com Inc was 0.11. The lowest was -4.08. And the median was -2.95.


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 Overstock.com 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 * 1.6665+0.528 * 0.9983+0.404 * 0.9195+0.892 * 1.0857+0.115 * 1.1209
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0571+4.679 * -0.085-0.327 * 0.9908
=-2.21

* 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 $9 Mil.
Revenue was 526.182 + 441.564 + 418.54 + 413.677 = $1,800 Mil.
Gross Profit was 98.004 + 79.716 + 76.322 + 77.307 = $331 Mil.
Total Current Assets was $261 Mil.
Total Assets was $485 Mil.
Property, Plant and Equipment(Net PPE) was $135 Mil.
Depreciation, Depletion and Amortization(DDA) was $31 Mil.
Selling, General & Admin. Expense(SGA) was $237 Mil.
Total Current Liabilities was $249 Mil.
Long-Term Debt was $56 Mil.
Net Income was 3.095 + -3.098 + -0.904 + 13.429 = $13 Mil.
Non Operating Income was 4.782 + 1.251 + 3.992 + 4.156 = $14 Mil.
Cash Flow from Operations was 55.003 + 11.543 + 7.521 + -34.503 = $40 Mil.
Accounts Receivable was $5 Mil.
Revenue was 480.27 + 391.211 + 388.013 + 398.344 = $1,658 Mil.
Gross Profit was 83.109 + 72.451 + 73.657 + 75.437 = $305 Mil.
Total Current Assets was $248 Mil.
Total Assets was $428 Mil.
Property, Plant and Equipment(Net PPE) was $94 Mil.
Depreciation, Depletion and Amortization(DDA) was $25 Mil.
Selling, General & Admin. Expense(SGA) was $207 Mil.
Total Current Liabilities was $259 Mil.
Long-Term Debt was $13 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)
=(9.054 / 1799.963) / (5.004 / 1657.838)
=0.0050301 / 0.00301839
=1.6665

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)
=(304.654 / 1657.838) / (331.349 / 1799.963)
=0.18376584 / 0.18408656
=0.9983

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 - (260.641 + 134.552) / 485.076) / (1 - (248.368 + 93.696) / 428.389)
=0.18529674 / 0.20151078
=0.9195

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
=1799.963 / 1657.838
=1.0857

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))
=(25.097 / (25.097 + 93.696)) / (31.251 / (31.251 + 134.552))
=0.21126666 / 0.18848272
=1.1209

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)
=(237.194 / 1799.963) / (206.655 / 1657.838)
=0.13177715 / 0.12465331
=1.0571

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)
=((56.01 + 249.216) / 485.076) / ((13.378 + 258.676) / 428.389)
=0.62923336 / 0.63506299
=0.9908

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
=(12.522 - 14.181 - 39.564) / 485.076
=-0.085

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.

Overstock.com Inc has a M-score of -2.21 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.

Overstock.com Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.99850.58031.55170.93720.56862.47810.4350.94430.41911.6665
GMI 0.71670.96550.9251.07991.02430.94110.95061.01871.01430.9983
AQI 0.39160.60120.89211.17471.46160.96838.08760.80491.1380.9195
SGI 0.96451.09171.05651.24310.96731.04271.18641.14791.10741.0857
DEPI 0.70371.08631.25231.11780.87680.90791.24141.35161.21911.1209
SGAI 0.8580.91211.01910.9011.73750.58891.11550.98821.02971.0571
LVGI 1.19781.08140.66751.19931.15710.89710.75161.05050.98570.9908
TATA -0.2366-0.0884-0.1924-0.0207-0.2527-0.09430.0031-0.1941-0.13-0.085
M-score -4.09-3.38-2.77-2.34-4.08-1.470.11-3.35-3.44-2.21

Overstock.com Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.89270.94430.84790.86450.98060.41911.12921.15131.16641.6665
GMI 1.01921.01871.0141.00141.00051.01431.02021.03221.03230.9983
AQI 2.96470.80490.87090.86151.36731.1381.02541.0340.71250.9195
SGI 1.14071.14791.16561.17261.1571.10741.07651.05841.06441.0857
DEPI 1.38631.35161.14651.24031.13551.21911.30551.3241.25221.1209
SGAI 1.0590.98820.99541.00911.03991.02971.02811.04361.02951.0571
LVGI 0.76891.05051.06611.08890.9530.98570.98321.03661.13480.9908
TATA 0.0253-0.1941-0.1908-0.1772-0.1335-0.13-0.1458-0.1804-0.1802-0.085
M-score -1.42-3.35-3.41-3.34-2.81-3.44-2.92-3.08-3.23-2.21
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