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GuruFocus has detected 6 Warning Signs with Procter & Gamble Co $PG.
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Procter & Gamble Co (NYSE:PG)
Beneish M-Score
-2.38 (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.

Procter & Gamble Co has a M-score of -2.38 suggests that the company is not a manipulator.

PG' s Beneish M-Score Range Over the Past 10 Years
Min: -3.19   Max: -1.8
Current: -2.38

-3.19
-1.8

During the past 13 years, the highest Beneish M-Score of Procter & Gamble Co was -1.80. The lowest was -3.19. And the median was -2.64.


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 Procter & Gamble Co 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 * 1.0277+0.528 * 0.9751+0.404 * 1.0855+0.892 * 0.9747+0.115 * 0.9909
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0262+4.679 * 0.0172-0.327 * 1.008
=-2.38

* 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 $4,729 Mil.
Revenue was 16856 + 16518 + 16102 + 15755 = $65,231 Mil.
Gross Profit was 8558 + 8416 + 7720 + 7840 = $32,534 Mil.
Total Current Assets was $25,572 Mil.
Total Assets was $117,033 Mil.
Property, Plant and Equipment(Net PPE) was $18,778 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,059 Mil.
Selling, General & Admin. Expense(SGA) was $19,068 Mil.
Total Current Liabilities was $28,891 Mil.
Long-Term Debt was $16,460 Mil.
Net Income was 7875 + 2714 + 1951 + 2750 = $15,290 Mil.
Non Operating Income was -539 + 63 + 287 + 21 = $-168 Mil.
Cash Flow from Operations was 3000 + 3025 + 4139 + 3278 = $13,442 Mil.
Accounts Receivable was $4,721 Mil.
Revenue was 16915 + 16527 + 16553 + 16930 = $66,925 Mil.
Gross Profit was 8455 + 8375 + 7716 + 8003 = $32,549 Mil.
Total Current Assets was $36,347 Mil.
Total Assets was $129,143 Mil.
Property, Plant and Equipment(Net PPE) was $18,910 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,048 Mil.
Selling, General & Admin. Expense(SGA) was $19,063 Mil.
Total Current Liabilities was $32,053 Mil.
Long-Term Debt was $17,595 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)
=(4729 / 65231) / (4721 / 66925)
=0.07249621 / 0.07054165
=1.0277

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)
=(32549 / 66925) / (32534 / 65231)
=0.48635039 / 0.49875059
=0.9751

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 - (25572 + 18778) / 117033) / (1 - (36347 + 18910) / 129143)
=0.62104706 / 0.57212547
=1.0855

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
=65231 / 66925
=0.9747

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))
=(3048 / (3048 + 18910)) / (3059 / (3059 + 18778))
=0.13881046 / 0.14008334
=0.9909

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)
=(19068 / 65231) / (19063 / 66925)
=0.292315 / 0.28484124
=1.0262

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)
=((16460 + 28891) / 117033) / ((17595 + 32053) / 129143)
=0.38750609 / 0.38444205
=1.008

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
=(15290 - -168 - 13442) / 117033
=0.0172

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.

Procter & Gamble Co has a M-score of -2.38 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.

Procter & Gamble Co Annual Data

Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15Jun16
DSRI 1.03290.95410.92010.88821.14480.95641.09781.05660.75221.0372
GMI 0.98881.00761.04210.95361.02181.02730.98841.05350.99830.9601
AQI 1.00281.00311.00991.01460.97720.98970.98810.93170.98890.9395
SGI 1.1211.06890.93821.02931.02741.01110.9770.92870.95090.923
DEPI 0.88921.03820.97280.98321.18230.86561.12310.98010.89761.0036
SGAI 0.99380.9830.94321.07321.00260.9981.02420.88881.01020.9959
LVGI 0.95040.96641.00950.93141.00120.97541.01491.05151.00131.0524
TATA -0.0265-0.0236-0.0139-0.0258-0.0135-0.0205-0.0323-0.0175-0.0619-0.0413
M-score -2.47-2.55-2.64-2.69-2.36-2.60-2.57-2.57-3.06-2.77

Procter & Gamble Co Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.03870.94370.90720.75890.81230.85590.94711.03721.04681.0277
GMI 1.05681.0681.07460.99770.97850.95670.93450.96010.97070.9751
AQI 0.95920.92560.93490.98890.91330.94680.95790.93951.00171.0855
SGI 0.91010.88960.86580.94260.93850.95070.97140.9230.95310.9747
DEPI 0.96350.91940.90230.89760.91430.9510.9911.00361.00920.9909
SGAI 0.89230.88720.87041.01251.0121.00741.03050.99591.00521.0262
LVGI 1.0091.04951.0171.00131.02471.00211.05291.05241.04981.008
TATA -0.0373-0.0464-0.0478-0.0619-0.0563-0.0581-0.0518-0.0413-0.03650.0172
M-score -2.67-2.85-2.89-3.06-3.04-2.98-2.87-2.77-2.68-2.38
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