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GuruFocus has detected 7 Warning Signs with Western Digital Corp $WDC.
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Western Digital Corp (NAS:WDC)
Beneish M-Score
-2.43 (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.

Western Digital Corp has a M-score of -2.46 suggests that the company is not a manipulator.

WDC' s Beneish M-Score Range Over the Past 10 Years
Min: -16.56   Max: 14.3
Current: -2.43

-16.56
14.3

During the past 13 years, the highest Beneish M-Score of Western Digital Corp was 14.30. The lowest was -16.56. And the median was -2.81.


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 Western Digital 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 * 1.0237+0.528 * 1.0211+0.404 * 2.3165+0.892 * 1.1864+0.115 * 0.7807
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.4105+4.679 * -0.0826-0.327 * 1.7131
=-2.46

* 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 $2,004 Mil.
Revenue was 4888 + 4714 + 3495 + 2822 = $15,919 Mil.
Gross Profit was 1533 + 1335 + 821 + 753 = $4,442 Mil.
Total Current Assets was $9,606 Mil.
Total Assets was $28,975 Mil.
Property, Plant and Equipment(Net PPE) was $3,238 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,688 Mil.
Selling, General & Admin. Expense(SGA) was $1,727 Mil.
Total Current Liabilities was $4,088 Mil.
Long-Term Debt was $12,944 Mil.
Net Income was 235 + -366 + -366 + 74 = $-423 Mil.
Non Operating Income was -24 + -272 + -73 + 0 = $-369 Mil.
Cash Flow from Operations was 1060 + 440 + 355 + 485 = $2,340 Mil.
Accounts Receivable was $1,650 Mil.
Revenue was 3317 + 3360 + 3191 + 3550 = $13,418 Mil.
Gross Profit was 906 + 955 + 930 + 1032 = $3,823 Mil.
Total Current Assets was $8,948 Mil.
Total Assets was $15,466 Mil.
Property, Plant and Equipment(Net PPE) was $2,801 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,023 Mil.
Selling, General & Admin. Expense(SGA) was $1,032 Mil.
Total Current Liabilities was $3,245 Mil.
Long-Term Debt was $2,062 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)
=(2004 / 15919) / (1650 / 13418)
=0.1258873 / 0.12296915
=1.0237

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)
=(3823 / 13418) / (4442 / 15919)
=0.28491578 / 0.27903763
=1.0211

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 - (9606 + 3238) / 28975) / (1 - (8948 + 2801) / 15466)
=0.55672131 / 0.24033364
=2.3165

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
=15919 / 13418
=1.1864

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))
=(1023 / (1023 + 2801)) / (1688 / (1688 + 3238))
=0.26752092 / 0.34267154
=0.7807

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)
=(1727 / 15919) / (1032 / 13418)
=0.10848671 / 0.07691161
=1.4105

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)
=((12944 + 4088) / 28975) / ((2062 + 3245) / 15466)
=0.58781708 / 0.34313979
=1.7131

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
=(-423 - -369 - 2340) / 28975
=-0.0826

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.

Western Digital Corp has a M-score of -2.46 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.

Western Digital Corp Annual Data

Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15Jun16
DSRI 1.15040.98140.99321.02630.99281.49650.61651.12550.79971.0695
GMI 1.16020.76421.20060.73591.29650.64491.02580.98630.99481.0958
AQI 2.94372.16230.92330.67960.81824.20930.92431.1531.08212.0975
SGI 1.25961.47660.92311.32160.96711.30991.23020.98560.96310.8917
DEPI 1.0221.11270.85481.21510.8971.26320.67470.91161.0041.1021
SGAI 0.85610.83240.98980.99761.10031.61891.14721.09151.10231.5612
LVGI 0.921.0680.86690.86910.90391.47470.96330.97870.89381.766
TATA -0.0186-0.1091-0.1578-0.0764-0.1144-0.1024-0.1524-0.0775-0.0513-0.0508
M-score -1.27-2.22-3.19-2.73-2.97-1.35-3.41-2.70-2.89-2.59

Western Digital Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.05880.96490.95210.79970.92110.99320.87581.06951.22051.0237
GMI 0.97760.9951.00250.99481.00331.00871.0291.09581.08271.0211
AQI 1.12590.9791.03151.08211.10151.07650.9672.09752.33982.3165
SGI 1.00990.99460.98850.96310.91620.88360.84420.89171.02571.1864
DEPI 0.91640.93880.96061.0041.0281.03961.03541.10210.90110.7807
SGAI 1.25871.16821.18611.10231.07941.2141.41521.59841.5771.4105
LVGI 0.96210.89750.89920.89380.88350.93790.89551.7661.67221.7131
TATA -0.0907-0.0614-0.0597-0.0513-0.0417-0.0762-0.0863-0.0508-0.0669-0.0826
M-score -2.84-2.82-2.80-2.89-2.75-2.92-3.17-2.60-2.31-2.46
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