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GuruFocus has detected 4 Warning Signs with Sears Holdings Corp $SHLD.
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Sears Holdings Corp (NAS:SHLD)
Beneish M-Score
-2.93 (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.

Sears Holdings Corp has a M-score of -2.93 suggests that the company is not a manipulator.

SHLD' s Beneish M-Score Range Over the Past 10 Years
Min: -3.43   Max: 6.25
Current: -2.93

-3.43
6.25

During the past 13 years, the highest Beneish M-Score of Sears Holdings Corp was 6.25. The lowest was -3.43. And the median was -2.65.


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 Sears Holdings Corp 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 * 0.8686+0.528 * 1.118+0.404 * 1.0223+0.892 * 0.9016+0.115 * 1.0896
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0102+4.679 * -0.0561-0.327 * 1.1767
=-2.93

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

This Year (Oct16) TTM:Last Year (Oct15) TTM:
Accounts Receivable was $372 Mil.
Revenue was 5029 + 5663 + 5394 + 7303 = $23,389 Mil.
Gross Profit was 962 + 1260 + 1177 + 1595 = $4,994 Mil.
Total Current Assets was $5,966 Mil.
Total Assets was $10,865 Mil.
Property, Plant and Equipment(Net PPE) was $2,392 Mil.
Depreciation, Depletion and Amortization(DDA) was $370 Mil.
Selling, General & Admin. Expense(SGA) was $6,382 Mil.
Total Current Liabilities was $5,730 Mil.
Long-Term Debt was $3,087 Mil.
Net Income was -748 + -395 + -471 + -580 = $-2,194 Mil.
Non Operating Income was 0 + -1 + 1 + -63 = $-63 Mil.
Cash Flow from Operations was -768 + 82 + -722 + -113 = $-1,521 Mil.
Accounts Receivable was $475 Mil.
Revenue was 5750 + 6211 + 5882 + 8099 = $25,942 Mil.
Gross Profit was 1262 + 1435 + 1518 + 1978 = $6,193 Mil.
Total Current Assets was $7,219 Mil.
Total Assets was $12,769 Mil.
Property, Plant and Equipment(Net PPE) was $2,668 Mil.
Depreciation, Depletion and Amortization(DDA) was $456 Mil.
Selling, General & Admin. Expense(SGA) was $7,007 Mil.
Total Current Liabilities was $6,518 Mil.
Long-Term Debt was $2,288 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)
=(372 / 23389) / (475 / 25942)
=0.01590491 / 0.01831008
=0.8686

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)
=(6193 / 25942) / (4994 / 23389)
=0.23872485 / 0.21351918
=1.118

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 - (5966 + 2392) / 10865) / (1 - (7219 + 2668) / 12769)
=0.23074091 / 0.22570287
=1.0223

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
=23389 / 25942
=0.9016

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))
=(456 / (456 + 2668)) / (370 / (370 + 2392))
=0.14596671 / 0.1339609
=1.0896

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)
=(6382 / 23389) / (7007 / 25942)
=0.27286331 / 0.27010254
=1.0102

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)
=((3087 + 5730) / 10865) / ((2288 + 6518) / 12769)
=0.81150483 / 0.68963897
=1.1767

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
=(-2194 - -63 - -1521) / 10865
=-0.0561

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.

Sears Holdings Corp has a M-score of -2.93 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.

Sears Holdings Corp Annual Data

Jan07Jan08Jan09Jan10Jan11Jan12Jan13Jan14Jan15Jan16
DSRI 0.97880.91411.22250.82521.09091.03530.95290.95910.89981.2118
GMI 0.96761.0331.02540.97511.01481.0720.96671.09041.05580.9918
AQI 1.01921.13231.10050.99111.0250.91180.97511.02911.01821.0772
SGI 1.0720.95640.92240.94170.96870.97430.95880.9080.86210.806
DEPI 0.78521.05310.97871.00840.98370.94960.95211.00921.03450.8356
SGAI 0.99121.0361.04551.02291.01011.04991.04260.96951.01611.035
LVGI 0.95751.04130.94570.94521.13611.17181.01331.12681.09121.0108
TATA -0.0071-0.0269-0.0413-0.0488-0.011-0.1337-0.0325-0.0252-0.03250.0971
M-score -2.49-2.67-2.48-2.92-2.51-3.16-2.76-2.69-2.84-2.01

Sears Holdings Corp Quarterly Data

Jul14Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16
DSRI 0.89031.13390.89981.02871.13091.12991.21181.09180.96350.8686
GMI 1.10521.09741.05581.01030.96340.95150.99181.0561.08571.118
AQI 0.93721.00511.01821.14031.12431.13481.07721.04831.08991.0223
SGI 0.90420.890.86210.81990.78830.770.8060.84440.880.9016
DEPI 1.05010.97931.03451.05710.73050.82910.83560.82551.19691.0896
SGAI 0.97640.9871.01611.02951.03191.03051.0351.01250.99511.0102
LVGI 1.18591.18841.09121.07480.96990.93541.01081.02871.13151.1767
TATA -0.0568-0.0469-0.0325-0.02690.04090.05180.09710.10020.013-0.0561
M-score -2.95-2.68-2.84-2.70-2.35-2.30-2.01-2.05-2.50-2.93
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