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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
-3.40 (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 -3.40 suggests that the company is not a manipulator.

RRD' s Beneish M-Score Range Over the Past 10 Years
Min: -3.47   Max: -1.94
Current: -3.4

-3.47
-1.94

During the past 13 years, the highest Beneish M-Score of R.R.Donnelley & Sons Co was -1.94. The lowest was -3.47. And the median was -2.99.


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 * 1.1013+0.528 * 1.0144+0.404 * 0.5454+0.892 * 0.994+0.115 * 1.1011
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0385+4.679 * -0.1454-0.327 * 1.4759
=-3.40

* 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 $1,237 Mil.
Revenue was -1384.9 + 2828 + 2748.1 + 2746.1 = $6,937 Mil.
Gross Profit was -410.3 + 619.9 + 615.8 + 579.7 = $1,405 Mil.
Total Current Assets was $3,102 Mil.
Total Assets was $7,279 Mil.
Property, Plant and Equipment(Net PPE) was $697 Mil.
Depreciation, Depletion and Amortization(DDA) was $454 Mil.
Selling, General & Admin. Expense(SGA) was $873 Mil.
Total Current Liabilities was $2,337 Mil.
Long-Term Debt was $2,187 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) / (1237.2 / 6937.3)
=0.19641226 / 0.17834028
=1.1013

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)
=(1405.1 / 6937.3) / (1376.8 / 6895.7)
=0.20254278 / 0.19966066
=1.0144

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 + 696.6) / 7279.3)
=0.26081173 / 0.47820532
=0.5454

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 / 6937.3
=0.994

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 + 696.6)) / (363.2 / (363.2 + 650.3))
=0.39457674 / 0.35836211
=1.1011

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) / (872.6 / 6937.3)
=0.13063213 / 0.12578381
=1.0385

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) / ((2186.8 + 2337.3) / 7279.3)
=0.91728709 / 0.62150207
=1.4759

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 -3.40 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 1.07010.96010.97641.11580.88291.05750.95121.62180.6291.1013
GMI 1.02511.0161.06821.02430.99891.04031.02631.08221.01451.0144
AQI 0.93550.79561.04551.03481.00420.87990.84461.15181.33770.5454
SGI 1.24370.99950.85111.01641.05910.96331.02530.68440.96720.994
DEPI 0.9880.90030.98411.00880.88040.99640.98270.98030.60381.1011
SGAI 0.9540.93761.04781.01541.03910.92581.04511.15390.96691.0385
LVGI 1.27851.13770.9581.03011.13121.12661.0660.94310.82011.4759
TATA -0.1016-0.127-0.191-0.0573-0.1219-0.1824-0.0517-0.0665-0.0628-0.1454
M-score -2.77-3.23-3.47-2.61-3.17-3.37-2.82-2.41-2.98-3.40

R.R.Donnelley & Sons Co Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.04161.62181.43821.4651.53920.6291.04121.03461.05351.1013
GMI 1.01091.08221.08131.08831.09021.01451.00250.99730.9971.0144
AQI 0.96431.15181.051.05031.0581.33771.02831.03061.01250.5454
SGI 1.08710.68440.68250.64780.61660.96720.94450.96240.97240.994
DEPI 1.04220.98030.83640.94130.96830.60381.01740.93870.97151.1011
SGAI 1.03611.15391.14191.1281.13850.96690.97591.12231.12371.0385
LVGI 1.01610.94310.98820.97380.98230.82010.9991.01951.03341.4759
TATA -0.0443-0.0665-0.0617-0.0682-0.0692-0.0628-0.0592-0.053-0.0375-0.1454
M-score -2.59-2.41-2.62-2.64-2.60-2.98-2.75-2.75-2.66-3.40
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