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GuruFocus has detected 7 Warning Signs with The Scotts Miracle Gro Co $SMG.
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The Scotts Miracle Gro Co (NYSE:SMG)
Beneish M-Score
-2.41 (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.

The Scotts Miracle Gro Co has a M-score of -2.41 suggests that the company is not a manipulator.

SMG' s Beneish M-Score Range Over the Past 10 Years
Min: -3.15   Max: -1.49
Current: -2.41

-3.15
-1.49

During the past 13 years, the highest Beneish M-Score of The Scotts Miracle Gro Co was -1.49. The lowest was -3.15. And the median was -2.57.


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 The Scotts Miracle Gro 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 * 1.0593+0.528 * 0.9417+0.404 * 1.0987+0.892 * 1.0492+0.115 * 0.9705
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9868+4.679 * -0.0096-0.327 * 0.9693
=-2.41

* 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 $229 Mil.
Revenue was 246.8 + 402.3 + 994.1 + 1245.2 = $2,888 Mil.
Gross Profit was 44.2 + 99.7 + 357.4 + 521.6 = $1,023 Mil.
Total Current Assets was $1,205 Mil.
Total Assets was $3,060 Mil.
Property, Plant and Equipment(Net PPE) was $462 Mil.
Depreciation, Depletion and Amortization(DDA) was $76 Mil.
Selling, General & Admin. Expense(SGA) was $539 Mil.
Total Current Liabilities was $443 Mil.
Long-Term Debt was $1,677 Mil.
Net Income was -65.3 + -26.6 + 213.1 + 210.1 = $331 Mil.
Non Operating Income was -13.2 + 11.3 + -3.5 + 0 = $-5 Mil.
Cash Flow from Operations was -209.8 + 266.3 + 598.9 + -289.2 = $366 Mil.
Accounts Receivable was $206 Mil.
Revenue was 194.5 + 375.4 + 1111.3 + 1071.8 = $2,753 Mil.
Gross Profit was 16.7 + 90.8 + 385.8 + 424.8 = $918 Mil.
Total Current Assets was $1,148 Mil.
Total Assets was $2,727 Mil.
Property, Plant and Equipment(Net PPE) was $449 Mil.
Depreciation, Depletion and Amortization(DDA) was $71 Mil.
Selling, General & Admin. Expense(SGA) was $520 Mil.
Total Current Liabilities was $446 Mil.
Long-Term Debt was $1,504 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)
=(229.4 / 2888.4) / (206.4 / 2753)
=0.07942113 / 0.07497276
=1.0593

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)
=(918.1 / 2753) / (1022.9 / 2888.4)
=0.33349074 / 0.3541407
=0.9417

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 - (1205.1 + 462) / 3060.4) / (1 - (1148 + 449.2) / 2727.4)
=0.45526729 / 0.41438733
=1.0987

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
=2888.4 / 2753
=1.0492

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))
=(70.9 / (70.9 + 449.2)) / (75.5 / (75.5 + 462))
=0.13631994 / 0.14046512
=0.9705

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)
=(538.6 / 2888.4) / (520.2 / 2753)
=0.18647002 / 0.1889575
=0.9868

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)
=((1677.2 + 442.9) / 3060.4) / ((1503.6 + 445.6) / 2727.4)
=0.69275258 / 0.71467332
=0.9693

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
=(331.3 - -5.4 - 366.2) / 3060.4
=-0.0096

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.

The Scotts Miracle Gro Co has a M-score of -2.41 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.

The Scotts Miracle Gro Co Annual Data

Sep07Sep08Sep09Sep10Sep11Sep12Sep13Sep14Sep15Sep16
DSRI 0.98210.98390.98780.89941.00411.02210.94631.15560.83781.1492
GMI 1.01331.110.88810.95571.02991.0440.9791.02161.03720.9483
AQI 0.97810.88850.96140.89771.05510.96251.04911.0191.14391.2567
SGI 1.06481.03830.99960.97230.96610.98961.00120.92961.05811.0396
DEPI 0.98990.91811.2081.04190.9971.06110.94131.05370.95510.9959
SGAI 1.03351.00351.04060.94911.03021.02990.92650.83440.95011.0008
LVGI 1.6220.99710.89430.8561.13260.95340.87091.17861.08210.9439
TATA -0.0504-0.0982-0.0501-0.04240.0229-0.0226-0.0934-0.0309-0.03450.0281
M-score -2.89-2.92-2.75-2.80-2.41-2.55-2.91-2.55-2.68-2.08

The Scotts Miracle Gro Co Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.16011.17631.05091.13670.82371.05340.9870.9361.16891.0593
GMI 1.01821.0431.0821.11781.02921.01930.97370.92220.95570.9417
AQI 1.0190.96520.80891.23331.14391.33161.55341.27081.25671.0987
SGI 0.9260.9410.91360.91851.07621.05691.12741.08441.02211.0492
DEPI 1.05370.99280.98210.96470.95510.94840.90420.9510.99590.9705
SGAI 0.82160.8510.83150.7730.99610.93310.93341.03170.95460.9868
LVGI 1.17861.13941.03681.12541.08211.04091.02190.9430.94390.9693
TATA -0.03090.0063-0.0167-0.0207-0.0345-0.0049-0.00550.0420.0281-0.0096
M-score -2.55-2.35-2.61-2.37-2.69-2.27-2.20-2.19-2.07-2.41
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