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GuruFocus has detected 5 Warning Signs with Telefonica SA $TEF.
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Telefonica SA (NYSE:TEF)
Beneish M-Score
-2.31 (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.

Telefonica SA has a M-score of -2.29 suggests that the company is not a manipulator.

TEF' s Beneish M-Score Range Over the Past 10 Years
Min: -7.04   Max: -1.71
Current: -2.31

-7.04
-1.71

During the past 13 years, the highest Beneish M-Score of Telefonica SA was -1.71. The lowest was -7.04. And the median was -2.35.


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 Telefonica SA 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 * 1.1911+0.528 * 0.9659+0.404 * 1.1416+0.892 * 0.996+0.115 * 1.068
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.2704+4.679 * 0.0022-0.327 * 0.9865
=-2.29

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

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $13,527 Mil.
Revenue was 14913.5802469 + 16850.5617978 + 12208.2405345 + 12344.2265795 = $56,317 Mil.
Gross Profit was 10777.7777778 + 11762.9213483 + 8984.40979955 + 10677.5599129 = $42,203 Mil.
Total Current Assets was $21,861 Mil.
Total Assets was $135,429 Mil.
Property, Plant and Equipment(Net PPE) was $38,776 Mil.
Depreciation, Depletion and Amortization(DDA) was $10,343 Mil.
Selling, General & Admin. Expense(SGA) was $12,268 Mil.
Total Current Liabilities was $38,732 Mil.
Long-Term Debt was $51,292 Mil.
Net Income was 1103.25476992 + 522.471910112 + 864.142538976 + -1995.64270153 = $494 Mil.
Non Operating Income was 0 + 96.6292134831 + -4.45434298441 + -296.296296296 = $-204 Mil.
Cash Flow from Operations was 0 + 397.752808989 + 0 + 0 = $398 Mil.
Accounts Receivable was $11,402 Mil.
Revenue was 13590.3479237 + 13540.9652076 + 12676.4069264 + 16732.4290999 = $56,540 Mil.
Gross Profit was 9945.00561167 + 9912.45791246 + 9366.88311688 + 11700.3699137 = $40,925 Mil.
Total Current Assets was $37,440 Mil.
Total Assets was $138,166 Mil.
Property, Plant and Equipment(Net PPE) was $33,886 Mil.
Depreciation, Depletion and Amortization(DDA) was $9,832 Mil.
Selling, General & Admin. Expense(SGA) was $9,695 Mil.
Total Current Liabilities was $40,684 Mil.
Long-Term Debt was $52,416 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)
=(13527.4971942 / 56316.6091587) / (11401.7957351 / 56540.1491576)
=0.2402044 / 0.2016584
=1.1911

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)
=(40924.7165547 / 56540.1491576) / (42202.6688385 / 56316.6091587)
=0.72381692 / 0.74938228
=0.9659

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 - (21860.8305275 + 38775.5331089) / 135428.731762) / (1 - (37439.9551066 + 33885.5218855) / 138166.105499)
=0.55226367 / 0.48377008
=1.1416

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
=56316.6091587 / 56540.1491576
=0.996

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))
=(9832.08610284 / (9832.08610284 + 33885.5218855)) / (10342.9105205 / (10342.9105205 + 38775.5331089))
=0.22489991 / 0.21057081
=1.068

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)
=(12267.8395348 / 56316.6091587) / (9695.35934374 / 56540.1491576)
=0.21783697 / 0.17147743
=1.2704

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)
=((51291.8069585 + 38731.7620651) / 135428.731762) / ((52416.3860831 + 40683.5016835) / 138166.105499)
=0.66473021 / 0.67382581
=0.9865

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
=(494.226517484 - -204.121425798 - 397.752808989) / 135428.731762
=0.0022

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.

Telefonica SA has a M-score of -2.29 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.

Telefonica SA Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.8970.97851.16831.02531.01370.71970.98091.28630.90441.0924
GMI 0.98541.00420.98380.971.02330.99771.01491.0020.92551.0332
AQI 0.98550.99120.94051.16161.00680.94190.92441.0970.91561.0996
SGI 1.2280.91471.05281.03530.96990.99330.94820.79790.80091.0671
DEPI 0.98840.98571.04481.06010.92730.96910.96961.16010.9361.0403
SGAI 0.95220.95581.01560.57281.04150.77650.9261.30271.45310.8631
LVGI 0.96131.03480.98060.94851.04120.99750.99510.97281.01430.4374
TATA -0.0642-0.0865-0.0729-0.0498-0.0871-0.0725-0.078-0.0685-0.0861-0.0926
M-score -2.67-2.99-2.64-2.51-2.92-3.07-2.92-2.70-3.31-2.50

Telefonica SA Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.25831.17290.8660.95580.97620.95051.24571.25741.19111.0523
GMI 1.00241.00180.99550.99170.98560.92630.93390.95450.96591.0322
AQI 1.01141.0970.94250.98630.95550.91561.01851.12471.14161.0996
SGI 0.91280.87510.8330.79950.77450.7620.80790.91690.9961.1078
DEPI 1.11971.07790.94780.99980.97020.9741.12181.07771.0681.0148
SGAI 1.90240.67830.9011.34971.38051.46241.44511.33791.27040.8496
LVGI 0.9660.97280.98480.96481.03221.01431.02221.05090.98650.4374
TATA 0.04120.03330.04450.04370.04470.02520.01680.00140.00220.0126
M-score -2.25-2.16-2.55-2.55-2.60-2.78-2.44-2.35-2.29-2.01
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