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GuruFocus has detected 4 Warning Signs with VMware Inc $VMW.
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VMware Inc (NYSE:VMW)
Beneish M-Score
-2.72 (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.

VMware Inc has a M-score of -2.72 suggests that the company is not a manipulator.

VMW' s Beneish M-Score Range Over the Past 10 Years
Min: -3.46   Max: -2.4
Current: -2.72

-3.46
-2.4

During the past 12 years, the highest Beneish M-Score of VMware Inc was -2.40. The lowest was -3.46. And the median was -2.77.


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 VMware Inc 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 * 1.0531+0.528 * 0.9923+0.404 * 0.9463+0.892 * 1.0793+0.115 * 0.9252
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9308+4.679 * -0.0708-0.327 * 1.0175
=-2.72

* 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 $1,856 Mil.
Revenue was 2033 + 1778 + 1693 + 1589 = $7,093 Mil.
Gross Profit was 1759 + 1512 + 1432 + 1338 = $6,041 Mil.
Total Current Assets was $10,335 Mil.
Total Assets was $16,643 Mil.
Property, Plant and Equipment(Net PPE) was $1,049 Mil.
Depreciation, Depletion and Amortization(DDA) was $345 Mil.
Selling, General & Admin. Expense(SGA) was $3,048 Mil.
Total Current Liabilities was $4,554 Mil.
Long-Term Debt was $1,500 Mil.
Net Income was 441 + 319 + 265 + 161 = $1,186 Mil.
Non Operating Income was -9 + -8 + 2 + -1 = $-16 Mil.
Cash Flow from Operations was 464 + 620 + 577 + 720 = $2,381 Mil.
Accounts Receivable was $1,633 Mil.
Revenue was 1868 + 1672 + 1521 + 1511 = $6,572 Mil.
Gross Profit was 1601 + 1414 + 1271 + 1268 = $5,554 Mil.
Total Current Assets was $9,360 Mil.
Total Assets was $15,746 Mil.
Property, Plant and Equipment(Net PPE) was $1,128 Mil.
Depreciation, Depletion and Amortization(DDA) was $335 Mil.
Selling, General & Admin. Expense(SGA) was $3,034 Mil.
Total Current Liabilities was $4,129 Mil.
Long-Term Debt was $1,500 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)
=(1856 / 7093) / (1633 / 6572)
=0.26166643 / 0.24847839
=1.0531

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)
=(5554 / 6572) / (6041 / 7093)
=0.84510043 / 0.85168476
=0.9923

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 - (10335 + 1049) / 16643) / (1 - (9360 + 1128) / 15746)
=0.3159887 / 0.33392608
=0.9463

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
=7093 / 6572
=1.0793

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))
=(335 / (335 + 1128)) / (345 / (345 + 1049))
=0.22898154 / 0.24748924
=0.9252

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)
=(3048 / 7093) / (3034 / 6572)
=0.42971944 / 0.46165551
=0.9308

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)
=((1500 + 4554) / 16643) / ((1500 + 4129) / 15746)
=0.36375653 / 0.35748762
=1.0175

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
=(1186 - -16 - 2381) / 16643
=-0.0708

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.

VMware Inc has a M-score of -2.72 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.

VMware Inc Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.77790.83941.46880.81511.08941.06650.93741.0750.9867
GMI 0.98760.99611.01950.9940.99080.98990.9811.01391.0035
AQI 0.51360.88771.08931.04640.93241.26020.85731.12940.9589
SGI 1.88351.41881.0761.41181.31841.22251.13071.1591.0888
DEPI 2.11570.99290.83240.86171.02091.0791.22071.14041.0918
SGAI 1.01011.00481.05530.9580.96691.00710.98151.09530.9822
LVGI 0.37260.83360.99380.95710.99720.97110.95191.18960.9897
TATA -0.124-0.1394-0.1578-0.1181-0.1572-0.1085-0.1257-0.0855-0.0568
M-score -2.35-2.90-2.70-2.81-2.87-2.61-3.03-2.67-2.68

VMware Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.04631.07491.03450.97030.9590.98641.02520.91681.02341.0531
GMI 1.00161.01371.01841.01941.01231.00370.99930.99240.99270.9923
AQI 1.05961.12940.93020.94710.97910.95890.97040.94390.98030.9463
SGI 1.15931.1591.15071.11811.10161.08921.07521.09171.08151.0793
DEPI 1.21211.14041.11921.09311.10641.09181.01450.9520.92050.9252
SGAI 1.05521.0951.08751.04511.02280.98290.96690.94580.93140.9308
LVGI 1.22841.18961.01931.01150.99660.98970.9590.92930.98211.0175
TATA -0.1056-0.0855-0.0834-0.0766-0.0593-0.0568-0.0611-0.0689-0.0807-0.0708
M-score -2.82-2.67-2.73-2.77-2.70-2.68-2.67-2.80-2.77-2.72
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