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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.
Valspar Corp has a M-score of -2.40 suggests that the company is not a manipulator.
During the past 13 years, the highest Beneish M-Score of Valspar Corp was -1.94. The lowest was -2.89. And the median was -2.51.
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 Valspar 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 * 1.1215||+||0.528 * 1.0032||+||0.404 * 1.0088||+||0.892 * 1.0685||+||0.115 * 1.0418|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9963||+||4.679 * -0.0165||-||0.327 * 1.0959|
|This Year (Apr14) TTM:||Last Year (Apr13) TTM:|
|Accounts Receivable was $853 Mil.|
Revenue was 1130.178 + 956.119 + 1108.302 + 1089.013 = $4,284 Mil.
Gross Profit was 380.758 + 319.053 + 355.793 + 369.361 = $1,425 Mil.
Total Current Assets was $1,622 Mil.
Total Assets was $4,092 Mil.
Property, Plant and Equipment(Net PPE) was $638 Mil.
Depreciation, Depletion and Amortization(DDA) was $99 Mil.
Selling, General & Admin. Expense(SGA) was $773 Mil.
Total Current Liabilities was $1,579 Mil.
Long-Term Debt was $1,092 Mil.
Net Income was 85.959 + 53.553 + 63.51 + 93.808 = $297 Mil.
Non Operating Income was -0.318 + -0.371 + -1.829 + -1.065 = $-4 Mil.
Cash Flow from Operations was -20.044 + 9.317 + 188.901 + 189.925 = $368 Mil.
|Accounts Receivable was $712 Mil.
Revenue was 1031.219 + 875.242 + 1024.284 + 1078.348 = $4,009 Mil.
Gross Profit was 338.553 + 294.351 + 340.998 + 363.95 = $1,338 Mil.
Total Current Assets was $1,532 Mil.
Total Assets was $3,748 Mil.
Property, Plant and Equipment(Net PPE) was $553 Mil.
Depreciation, Depletion and Amortization(DDA) was $90 Mil.
Selling, General & Admin. Expense(SGA) was $727 Mil.
Total Current Liabilities was $1,220 Mil.
Long-Term Debt was $1,013 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(852.678 / 4283.612)||/||(711.599 / 4009.093)|
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.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(319.053 / 4009.093)||/||(380.758 / 4283.612)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (1622.498 + 638.096) / 4092.162)||/||(1 - (1531.675 + 553.262) / 3747.631)|
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.
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))|
|=||(89.658 / (89.658 + 553.262))||/||(98.616 / (98.616 + 638.096))|
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)|
|=||(773.352 / 4283.612)||/||(726.507 / 4009.093)|
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)|
|=||((1092.419 + 1579.096) / 4092.162)||/||((1012.55 + 1219.884) / 3747.631)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(296.83 - -3.583||-||368.099)||/||4092.162|
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.
Valspar Corp has a M-score of -2.40 suggests that the company will not be a manipulator.
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
Valspar Corp Annual Data
Valspar Corp Quarterly Data