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GuruFocus has detected 2 Warning Signs with R.R.Donnelley & Sons Co $RRD.
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R.R.Donnelley & Sons Co (NYSE:RRD)
Beneish M-Score
-3.61 (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.

R.R.Donnelley & Sons Co has a M-score of -3.61 suggests that the company is not a manipulator.

RRD' s Beneish M-Score Range Over the Past 10 Years
Min: -3.61   Max: -1.94
Current: -3.61

-3.61
-1.94

During the past 13 years, the highest Beneish M-Score of R.R.Donnelley & Sons Co was -1.94. The lowest was -3.61. And the median was -2.77.


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 R.R.Donnelley & Sons 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 * 1.1053+0.528 * 1.0963+0.404 * 0.6956+0.892 * 0.6126+0.115 * 0.666
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1312+4.679 * -0.1454-0.327 * 1.2084
=-3.61

* 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 $1,354 Mil.
Revenue was -1257.8 + 2772.4 + 2729.7 + 2651.4 = $6,896 Mil.
Gross Profit was -405.1 + 607.7 + 604.9 + 569.3 = $1,377 Mil.
Total Current Assets was $2,517 Mil.
Total Assets was $4,285 Mil.
Property, Plant and Equipment(Net PPE) was $650 Mil.
Depreciation, Depletion and Amortization(DDA) was $363 Mil.
Selling, General & Admin. Expense(SGA) was $901 Mil.
Total Current Liabilities was $1,551 Mil.
Long-Term Debt was $2,379 Mil.
Net Income was -514.1 + -7.1 + -14.5 + 39.8 = $-496 Mil.
Non Operating Income was 87.8 + -84.7 + -1 + 0 = $2 Mil.
Cash Flow from Operations was 117.4 + 108.1 + 92.5 + -192.8 = $125 Mil.
Accounts Receivable was $2,000 Mil.
Revenue was 2934.6 + 2828 + 2748.1 + 2746.1 = $11,257 Mil.
Gross Profit was 648.6 + 619.9 + 615.8 + 579.7 = $2,464 Mil.
Total Current Assets was $3,102 Mil.
Total Assets was $7,279 Mil.
Property, Plant and Equipment(Net PPE) was $1,448 Mil.
Depreciation, Depletion and Amortization(DDA) was $454 Mil.
Selling, General & Admin. Expense(SGA) was $1,300 Mil.
Total Current Liabilities was $2,337 Mil.
Long-Term Debt was $3,188 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)
=(1354.4 / 6895.7) / (2000.4 / 11256.8)
=0.19641226 / 0.17770592
=1.1053

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)
=(2464 / 11256.8) / (1376.8 / 6895.7)
=0.21888992 / 0.19966066
=1.0963

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 - (2516.9 + 650.3) / 4284.7) / (1 - (3101.7 + 1448.1) / 7279.3)
=0.26081173 / 0.37496737
=0.6956

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
=6895.7 / 11256.8
=0.6126

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))
=(454 / (454 + 1448.1)) / (363.2 / (363.2 + 650.3))
=0.23868356 / 0.35836211
=0.666

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)
=(900.8 / 6895.7) / (1300 / 11256.8)
=0.13063213 / 0.11548575
=1.1312

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)
=((2379.2 + 1551.1) / 4284.7) / ((3188.3 + 2337.3) / 7279.3)
=0.91728709 / 0.75908398
=1.2084

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
=(-495.9 - 2.1 - 125.2) / 4284.7
=-0.1454

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.

R.R.Donnelley & Sons Co has a M-score of -3.61 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.

R.R.Donnelley & Sons Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.07030.8731.07361.11580.88291.05750.95121.00251.01391.1053
GMI 1.02511.0161.06821.02430.99891.04031.02631.01161.00421.0963
AQI 0.93550.79561.04551.03481.00420.87990.84461.16011.04140.6956
SGI 1.24370.99950.85111.01641.05910.96331.02531.10720.97010.6126
DEPI 0.9880.90030.98411.00880.88040.99640.98270.98030.99820.666
SGAI 0.9540.93761.04781.01541.03910.92581.04511.09090.93911.1312
LVGI 1.27851.13770.9581.03011.13121.12661.0660.94441.00041.2084
TATA -0.1016-0.1267-0.1642-0.0819-0.1223-0.1824-0.0517-0.0679-0.0628-0.1454
M-score -2.77-3.31-3.26-2.73-3.17-3.37-2.82-2.63-2.76-3.61

R.R.Donnelley & Sons Co Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.04161.00250.89240.90160.94051.01391.02861.02941.05251.1053
GMI 1.01091.01161.00881.011.01051.00420.99630.99420.99441.0963
AQI 0.96431.16011.051.05031.0581.04141.02831.03061.01250.6956
SGI 1.08711.10721.09991.05251.0090.97010.9560.96720.97340.6126
DEPI 1.04220.98030.83640.94130.96830.99821.01740.93870.97150.666
SGAI 1.03611.09091.07791.06641.07110.93910.94391.03921.04071.1312
LVGI 1.01610.94440.98820.97380.98231.00040.9991.01951.03341.2084
TATA -0.0443-0.0679-0.0634-0.0699-0.0709-0.0628-0.0592-0.053-0.0375-0.1454
M-score -2.59-2.63-2.79-2.83-2.84-2.76-2.75-2.74-2.65-3.61
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