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GuruFocus has detected 5 Warning Signs with The Valspar Corp $VAL.
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The Valspar Corp (NYSE:VAL)
Beneish M-Score
-2.57 (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.

The Valspar Corp has a M-score of -2.57 suggests that the company is not a manipulator.

VAL' s Beneish M-Score Range Over the Past 10 Years
Min: -3.13   Max: -1.94
Current: -2.57

-3.13
-1.94

During the past 13 years, the highest Beneish M-Score of The Valspar Corp was -1.94. The lowest was -3.13. And the median was -2.52.


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 The 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 * 1.0414+0.528 * 0.994+0.404 * 0.9805+0.892 * 0.988+0.115 * 0.9731
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0827+4.679 * -0.0243-0.327 * 0.932
=-2.57

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

This Year (Jan17) TTM:Last Year (Jan16) TTM:
Accounts Receivable was $692 Mil.
Revenue was 907.652 + 1106.057 + 1141.942 + 1056.797 = $4,212 Mil.
Gross Profit was 310.519 + 393.569 + 421.947 + 401.441 = $1,527 Mil.
Total Current Assets was $1,504 Mil.
Total Assets was $4,158 Mil.
Property, Plant and Equipment(Net PPE) was $658 Mil.
Depreciation, Depletion and Amortization(DDA) was $99 Mil.
Selling, General & Admin. Expense(SGA) was $878 Mil.
Total Current Liabilities was $1,180 Mil.
Long-Term Debt was $1,543 Mil.
Net Income was 40.747 + 103.594 + 116.988 + 80.027 = $341 Mil.
Non Operating Income was 0.676 + -2.491 + -0.103 + -0.751 = $-3 Mil.
Cash Flow from Operations was -17.149 + 232.309 + 213.428 + 16.486 = $445 Mil.
Accounts Receivable was $672 Mil.
Revenue was 885.756 + 1149.538 + 1149.126 + 1079.289 = $4,264 Mil.
Gross Profit was 318.627 + 413.611 + 411.283 + 393.203 = $1,537 Mil.
Total Current Assets was $1,502 Mil.
Total Assets was $4,175 Mil.
Property, Plant and Equipment(Net PPE) was $629 Mil.
Depreciation, Depletion and Amortization(DDA) was $92 Mil.
Selling, General & Admin. Expense(SGA) was $821 Mil.
Total Current Liabilities was $1,225 Mil.
Long-Term Debt was $1,708 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)
=(691.731 / 4212.448) / (672.296 / 4263.709)
=0.16421117 / 0.15767868
=1.0414

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)
=(1536.724 / 4263.709) / (1527.476 / 4212.448)
=0.36041953 / 0.36261005
=0.994

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 - (1504.022 + 657.87) / 4158.109) / (1 - (1501.722 + 629.16) / 4175.241)
=0.48007808 / 0.48963856
=0.9805

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
=4212.448 / 4263.709
=0.988

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))
=(91.723 / (91.723 + 629.16)) / (98.964 / (98.964 + 657.87))
=0.12723701 / 0.13076051
=0.9731

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)
=(877.991 / 4212.448) / (820.788 / 4263.709)
=0.20842774 / 0.19250563
=1.0827

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)
=((1543.302 + 1179.778) / 4158.109) / ((1708.431 + 1225.322) / 4175.241)
=0.65488423 / 0.70265477
=0.932

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
=(341.356 - -2.669 - 445.074) / 4158.109
=-0.0243

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.

The Valspar Corp has a M-score of -2.57 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.

The Valspar Corp Annual Data

Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Oct15Oct16
DSRI 1.03630.98051.10891.08240.86341.00711.08560.98811.07410.9971
GMI 1.01711.06560.82551.02381.06580.92561.040.9730.94210.9638
AQI 1.00031.01930.99960.92510.8920.9651.00350.99781.05940.9986
SGI 1.09111.07170.82671.12081.22511.01721.04331.10270.94960.954
DEPI 1.06170.86470.94711.19380.82811.0411.18980.90321.05960.9982
SGAI 1.01530.95551.24520.89031.01030.98510.93611.05991.02221.1113
LVGI 1.00270.96050.96661.04721.17261.01461.11241.0521.08160.9192
TATA -0.0088-0.0303-0.0499-0.0117-0.1223-0.0162-0.02620.00020.0044-0.0291
M-score -2.39-2.53-2.90-2.34-3.06-2.58-2.47-2.45-2.47-2.67

The Valspar Corp Quarterly Data

Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17
DSRI 0.98811.02940.93131.05271.07410.98281.08741.01290.99711.0414
GMI 0.9730.96520.94330.93130.94210.92460.93750.94280.96380.994
AQI 0.99780.97760.99541.02851.05941.09491.07241.02670.99860.9805
SGI 1.10271.08431.03640.9870.94960.91470.92510.940.9540.988
DEPI 0.90320.97681.00051.03431.05961.05711.05061.01240.99820.9731
SGAI 1.05771.05361.06231.04511.02221.06171.05451.05541.11181.0827
LVGI 1.0521.06091.05951.10551.08161.0480.99420.92550.91920.932
TATA 0.00020.02060.01580.02140.0044-0.0179-0.0223-0.0377-0.0291-0.0243
M-score -2.45-2.34-2.50-2.41-2.47-2.68-2.58-2.70-2.67-2.57
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