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GuruFocus has detected 4 Warning Signs with Telefonica SA $TEF.
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Telefonica SA (NYSE:TEF)
Beneish M-Score
-2.24 (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 -2.23 suggests that the company is not a manipulator.

TEF' s Beneish M-Score Range Over the Past 10 Years
Min: -7.73   Max: -0.68
Current: -2.24

-7.73
-0.68

During the past 13 years, the highest Beneish M-Score of Telefonica SA was -0.68. The lowest was -7.73. And the median was -2.25.


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 * 1.144+0.528 * 1.042+0.404 * 1.1416+0.892 * 1.0371+0.115 * 1.0862
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0969+4.679 * 0.0019-0.327 * 0.9865
=-2.23

* 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 + 16563.1808279 = $60,536 Mil.
Gross Profit was 10777.7777778 + 11762.9213483 + 8984.40979955 + 11842.0479303 = $43,367 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 $10,682 Mil.
Selling, General & Admin. Expense(SGA) was $11,155 Mil.
Total Current Liabilities was $38,732 Mil.
Long-Term Debt was $51,292 Mil.
Net Income was 1103.25476992 + 522.471910112 + 864.142538976 + -2435.72984749 = $54 Mil.
Non Operating Income was 0 + 96.6292134831 + -4.45434298441 + -291.938997821 = $-200 Mil.
Cash Flow from Operations was 0 + 0 + 0 + 0 = $0 Mil.
Accounts Receivable was $11,402 Mil.
Revenue was 15865.3198653 + 15735.1290685 + 12676.4069264 + 14092.4784217 = $58,369 Mil.
Gross Profit was 11205.3872054 + 11106.6217733 + 9366.88311688 + 11892.7250308 = $43,572 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 $10,386 Mil.
Selling, General & Admin. Expense(SGA) was $9,805 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 / 60535.5634071) / (11401.7957351 / 58369.3342819)
=0.22346364 / 0.1953388
=1.144

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)
=(43571.6171264 / 58369.3342819) / (43367.1568559 / 60535.5634071)
=0.74648131 / 0.7163914
=1.042

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
=60535.5634071 / 58369.3342819
=1.0371

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))
=(10385.7554169 / (10385.7554169 + 33885.5218855)) / (10681.6904769 / (10681.6904769 + 38775.5331089))
=0.23459353 / 0.21597837
=1.0862

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)
=(11154.5497745 / 60535.5634071) / (9805.25955146 / 58369.3342819)
=0.18426441 / 0.16798649
=1.0969

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
=(54.1393715147 - -199.764127323 - 0) / 135428.731762
=0.0019

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 -2.23 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

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.88260.8970.97851.16831.07280.72150.96631.14021.32620.6259
GMI 1.05440.98541.00420.98380.971.02330.99770.95150.99041.078
AQI 1.22110.98550.99120.94051.16161.00680.94190.92451.09980.9132
SGI 1.62391.2280.91471.05281.03530.96990.99330.81580.77391.1572
DEPI 0.86680.98840.98571.04481.06010.92730.96921.05641.18670.7595
SGAI 0.84150.95220.95580.54550.8221.35140.9150.98531.14771.0298
LVGI 1.09880.96131.03480.98060.94851.04120.99750.99510.97251.0146
TATA -0.0855-0.0642-0.0865-0.0729-0.0498-0.0871-0.0725-0.0782-0.0686-0.1034
M-score -2.33-2.67-2.99-2.56-2.51-3.24-2.87-2.93-2.66-3.20

Telefonica SA Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
DSRI 1.43251.73121.20370.81760.78390.68730.67980.92351.06081.144
GMI 0.92230.89840.99491.00661.03281.06641.06651.06931.06081.042
AQI 0.94221.01141.09980.94250.98630.95550.91321.01851.12471.1416
SGI 0.71490.66350.85270.88240.97481.11.06551.08971.08681.0371
DEPI 1.30751.39751.09930.90560.85660.74520.8080.95811.00441.0862
SGAI 1.08821.16621.12621.10561.04330.97041.06061.0661.06731.0969
LVGI 0.97790.9660.97250.98480.96481.03221.01461.02221.05090.9865
TATA 0.04160.03960.03310.04440.04170.04160.01730.0091-0.00040.0019
M-score -2.18-1.94-2.23-2.59-2.51-2.50-2.67-2.41-2.29-2.23
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