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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 -2.35 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 -3.13. 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 * 1.1118||+||0.528 * 0.9981||+||0.404 * 1.0288||+||0.892 * 1.094||+||0.115 * 1.0039|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0461||+||4.679 * -0.0084||-||0.327 * 1.0652|
|This Year (Jul14) TTM:||Last Year (Jul13) TTM:|
|Accounts Receivable was $871 Mil.|
Revenue was 1203.062 + 1130.178 + 956.119 + 1108.302 = $4,398 Mil.
Gross Profit was 416.692 + 380.758 + 319.053 + 355.793 = $1,472 Mil.
Total Current Assets was $1,688 Mil.
Total Assets was $4,180 Mil.
Property, Plant and Equipment(Net PPE) was $643 Mil.
Depreciation, Depletion and Amortization(DDA) was $100 Mil.
Selling, General & Admin. Expense(SGA) was $816 Mil.
Total Current Liabilities was $1,670 Mil.
Long-Term Debt was $1,078 Mil.
Net Income was 97.833 + 85.959 + 53.553 + 63.51 = $301 Mil.
Non Operating Income was -1.812 + -0.318 + -0.371 + -1.829 = $-4 Mil.
Cash Flow from Operations was 162.185 + -20.044 + 9.317 + 188.901 = $340 Mil.
|Accounts Receivable was $716 Mil.
Revenue was 1089.013 + 1031.219 + 875.242 + 1024.284 = $4,020 Mil.
Gross Profit was 369.361 + 338.553 + 294.351 + 340.998 = $1,343 Mil.
Total Current Assets was $1,636 Mil.
Total Assets was $3,844 Mil.
Property, Plant and Equipment(Net PPE) was $556 Mil.
Depreciation, Depletion and Amortization(DDA) was $87 Mil.
Selling, General & Admin. Expense(SGA) was $713 Mil.
Total Current Liabilities was $1,360 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)|
|=||(870.954 / 4397.661)||/||(716.033 / 4019.758)|
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)|
|=||(380.758 / 4019.758)||/||(416.692 / 4397.661)|
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 - (1688.35 + 643.069) / 4179.798)||/||(1 - (1635.91 + 555.568) / 3843.515)|
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))|
|=||(87.116 / (87.116 + 555.568))||/||(100.383 / (100.383 + 643.069))|
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)|
|=||(815.99 / 4397.661)||/||(713.01 / 4019.758)|
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)|
|=||((1077.921 + 1670.424) / 4179.798)||/||((1012.55 + 1359.909) / 3843.515)|
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|
|=||(300.855 - -4.33||-||340.359)||/||4179.798|
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 -2.35 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