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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
-2.35 (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 -2.38 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: -2.35

-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 -2.32.


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 * 1.02+0.528 * 1.0011+0.404 * 0.967+0.892 * 0.9851+0.115 * 1.0123
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8221+4.679 * 0.0156-0.327 * 0.9936
=-2.38

* 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 $9,312 Mil.
Revenue was 13802.742616 + 14913.5802469 + 16850.5617978 + 12208.2405345 = $57,775 Mil.
Gross Profit was 11301.6877637 + 10777.7777778 + 11762.9213483 + 8984.40979955 = $42,827 Mil.
Total Current Assets was $21,070 Mil.
Total Assets was $130,423 Mil.
Property, Plant and Equipment(Net PPE) was $38,389 Mil.
Depreciation, Depletion and Amortization(DDA) was $10,645 Mil.
Selling, General & Admin. Expense(SGA) was $11,337 Mil.
Total Current Liabilities was $37,396 Mil.
Long-Term Debt was $641 Mil.
Net Income was 151.898734177 + 1103.25476992 + 522.471910112 + 864.142538976 = $2,642 Mil.
Non Operating Income was 511.603375527 + 0 + 96.6292134831 + -4.45434298441 = $604 Mil.
Cash Flow from Operations was 0 + 0 + 0 + 0 = $0 Mil.
Accounts Receivable was $9,268 Mil.
Revenue was 14372.5490196 + 15865.3198653 + 15735.1290685 + 12676.4069264 = $58,649 Mil.
Gross Profit was 11842.0479303 + 11205.3872054 + 11106.6217733 + 9366.88311688 = $43,521 Mil.
Total Current Assets was $20,387 Mil.
Total Assets was $131,077 Mil.
Property, Plant and Equipment(Net PPE) was $36,939 Mil.
Depreciation, Depletion and Amortization(DDA) was $10,404 Mil.
Selling, General & Admin. Expense(SGA) was $13,998 Mil.
Total Current Liabilities was $37,455 Mil.
Long-Term Debt was $1,020 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)
=(9312.23628692 / 57775.1251952) / (9267.97385621 / 58649.4048798)
=0.16118072 / 0.15802332
=1.02

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)
=(43520.9400258 / 58649.4048798) / (42826.7966894 / 57775.1251952)
=0.74205254 / 0.74126705
=1.0011

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 - (21069.6202532 + 38389.2405063) / 130422.995781) / (1 - (20386.7102397 + 36938.9978214) / 131077.342048)
=0.54410754 / 0.56265738
=0.967

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
=57775.1251952 / 58649.4048798
=0.9851

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))
=(10404.0899188 / (10404.0899188 + 36938.9978214)) / (10644.9981629 / (10644.9981629 + 38389.2405063))
=0.21975943 / 0.21709317
=1.0123

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)
=(11337.115065 / 57775.1251952) / (13998.3117826 / 58649.4048798)
=0.19622831 / 0.23867781
=0.8221

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)
=((641.35021097 + 37395.5696203) / 130422.995781) / ((1019.60784314 + 37455.3376906) / 131077.342048)
=0.29164274 / 0.29352858
=0.9936

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
=(2641.76795319 - 603.778246026 - 0) / 130422.995781
=0.0156

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 -2.38 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 0.8970.97851.16831.07280.72150.96631.14021.14410.87261.095
GMI 0.98541.00420.98380.971.02330.99770.95151.03390.99620.9924
AQI 0.98550.99120.94051.16161.00680.94190.92451.09981.03840.967
SGI 1.2280.91471.05281.03530.96990.99330.81580.89710.9630.9176
DEPI 0.98840.98571.04481.06010.92730.96921.05641.060.92121.0617
SGAI 0.95220.95580.54550.8221.35140.9150.98531.20831.26180.8547
LVGI 0.96131.03480.98060.94851.04120.99750.99510.97250.44670.9936
TATA -0.0642-0.0865-0.0729-0.0498-0.0871-0.0725-0.0782-0.0685-0.1057-0.0926
M-score -2.67-2.99-2.56-2.51-3.24-2.87-2.93-2.72-2.98-2.88

Telefonica SA Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.73121.04720.70850.68120.59970.94041.10591.26581.36041.02
GMI 0.89841.03591.04941.07461.10720.98740.98860.98310.96731.0011
AQI 1.01141.09980.94250.98630.95551.03841.01851.12471.14160.967
SGI 0.66350.98011.01831.12181.26070.89360.910.91070.87210.9851
DEPI 1.39750.98940.81730.7750.67840.97311.06161.11021.19311.0123
SGAI 1.16621.18511.16391.1011.02661.30181.30761.3051.34150.8221
LVGI 0.9660.97250.98480.96481.03220.44671.02221.05090.98650.9936
TATA 0.03960.03320.04450.04190.04170.01770.0091-0.00040.00190.0156
M-score -1.94-2.26-2.57-2.47-2.43-2.41-2.47-2.33-2.25-2.38
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