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GuruFocus has detected 4 Warning Signs with PPG Industries Inc $PPG.
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PPG Industries Inc (NYSE:PPG)
Beneish M-Score
-2.30 (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.

PPG Industries Inc has a M-score of -2.30 suggests that the company is not a manipulator.

PPG' s Beneish M-Score Range Over the Past 10 Years
Min: -3.16   Max: -2.02
Current: -2.3

-3.16
-2.02

During the past 13 years, the highest Beneish M-Score of PPG Industries Inc was -2.02. The lowest was -3.16. And the median was -2.58.


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 PPG Industries 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 * 0.9844+0.528 * 0.9941+0.404 * 0.9503+0.892 * 0.9999+0.115 * 0.9425
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0125+4.679 * 0.0469-0.327 * 0.9874
=-2.30

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Mar17) TTM:Last Year (Mar16) TTM:
Accounts Receivable was $3,057 Mil.
Revenue was 3569 + 3497 + 3789 + 4064 = $14,919 Mil.
Gross Profit was 1600 + 1529 + 1708 + 1874 = $6,711 Mil.
Total Current Assets was $6,646 Mil.
Total Assets was $16,154 Mil.
Property, Plant and Equipment(Net PPE) was $2,806 Mil.
Depreciation, Depletion and Amortization(DDA) was $461 Mil.
Selling, General & Admin. Expense(SGA) was $3,689 Mil.
Total Current Liabilities was $4,273 Mil.
Long-Term Debt was $3,817 Mil.
Net Income was 334 + 344 + -184 + 370 = $864 Mil.
Non Operating Income was 11 + -221 + -958 + 19 = $-1,149 Mil.
Cash Flow from Operations was 9 + 574 + 776 + -104 = $1,255 Mil.
Accounts Receivable was $3,106 Mil.
Revenue was 3544 + 3552 + 3725 + 4100 = $14,921 Mil.
Gross Profit was 1624 + 1555 + 1676 + 1817 = $6,672 Mil.
Total Current Assets was $6,718 Mil.
Total Assets was $17,315 Mil.
Property, Plant and Equipment(Net PPE) was $3,038 Mil.
Depreciation, Depletion and Amortization(DDA) was $466 Mil.
Selling, General & Admin. Expense(SGA) was $3,644 Mil.
Total Current Liabilities was $4,556 Mil.
Long-Term Debt was $4,226 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)
=(3057 / 14919) / (3106 / 14921)
=0.2049065 / 0.20816299
=0.9844

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)
=(6672 / 14921) / (6711 / 14919)
=0.44715502 / 0.44982908
=0.9941

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 - (6646 + 2806) / 16154) / (1 - (6718 + 3038) / 17315)
=0.41488176 / 0.4365579
=0.9503

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
=14919 / 14921
=0.9999

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))
=(466 / (466 + 3038)) / (461 / (461 + 2806))
=0.13299087 / 0.14110805
=0.9425

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)
=(3689 / 14919) / (3644 / 14921)
=0.24726858 / 0.24421956
=1.0125

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)
=((3817 + 4273) / 16154) / ((4226 + 4556) / 17315)
=0.50080475 / 0.5071903
=0.9874

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
=(864 - -1149 - 1255) / 16154
=0.0469

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.

PPG Industries Inc has a M-score of -2.30 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.

PPG Industries Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.00950.85721.21370.96381.03960.94080.84810.93180.9920.9929
GMI 1.04621.00040.93550.98960.96521.00260.96120.95770.98050.9799
AQI 0.85341.53391.02340.90360.98870.96191.09541.25360.96810.9416
SGI 1.23921.2970.77221.09670.97990.96451.12451.03690.99830.999
DEPI 1.04610.80711.12860.99661.10241.11290.89381.0690.88820.9972
SGAI 1.01691.14551.10780.92511.06950.9921.03791.02250.98221.0115
LVGI 1.17091.06340.9511.09630.9880.97460.95981.01321.06510.9967
TATA -0.0192-0.0665-0.0768-0.0361-0.0299-0.03610.10160.0516-0.01820.0459
M-score -2.44-2.51-2.86-2.66-2.62-2.73-2.02-2.19-2.63-2.31

PPG Industries Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.93180.98021.0431.06890.97391.04170.94270.94641.00150.9844
GMI 0.95770.96380.96980.96410.98590.98030.97460.98360.97710.9941
AQI 1.25361.31031.30871.3090.96811.0361.00431.04360.94160.9503
SGI 1.03691.00160.98950.96521.01681.0071.00341.02220.99040.9999
DEPI 1.0691.11461.05291.10920.88820.99270.99670.94890.99720.9425
SGAI 1.02251.01761.00481.00330.97180.97540.98770.99381.01661.0125
LVGI 1.01321.09191.12311.11721.06511.00150.99240.97030.99670.9874
TATA 0.05160.03190.01570.0097-0.0184-0.0455-0.01120.01110.04560.0469
M-score -2.19-2.26-2.30-2.32-2.62-2.64-2.59-2.44-2.31-2.30
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