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GuruFocus has detected 4 Warning Signs with Westlake Chemical Corp $WLK.
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Westlake Chemical Corp (NYSE:WLK)
Beneish M-Score
-1.35 (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.

Westlake Chemical Corp has a M-score of -1.35 signals that the company is a manipulator.

WLK' s Beneish M-Score Range Over the Past 10 Years
Min: -3.22   Max: -1.18
Current: -1.35

-3.22
-1.18

During the past 13 years, the highest Beneish M-Score of Westlake Chemical Corp was -1.18. The lowest was -3.22. And the median was -2.47.


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 Westlake Chemical 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 * 1.6777+0.528 * 1.3744+0.404 * 2.7035+0.892 * 1.1371+0.115 * 1.3611
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1528+4.679 * -0.0446-0.327 * 1.9412
=-1.35

* 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 $810 Mil.
Revenue was 1735.18 + 1279.028 + 1086.061 + 975.187 = $5,075 Mil.
Gross Profit was 281.478 + 202.133 + 241.366 + 255.585 = $981 Mil.
Total Current Assets was $2,408 Mil.
Total Assets was $10,890 Mil.
Property, Plant and Equipment(Net PPE) was $6,420 Mil.
Depreciation, Depletion and Amortization(DDA) was $378 Mil.
Selling, General & Admin. Expense(SGA) was $295 Mil.
Total Current Liabilities was $1,183 Mil.
Long-Term Debt was $3,679 Mil.
Net Income was 98.945 + 65.662 + 111.124 + 123.128 = $399 Mil.
Non Operating Income was 2.785 + 40.728 + 5.097 + 2.645 = $51 Mil.
Cash Flow from Operations was 289.692 + 174.268 + 240.957 + 128.935 = $834 Mil.
Accounts Receivable was $424 Mil.
Revenue was 986.766 + 1188.037 + 1185.002 + 1103.531 = $4,463 Mil.
Gross Profit was 236.188 + 311.276 + 353.181 + 284.546 = $1,185 Mil.
Total Current Assets was $2,175 Mil.
Total Assets was $5,569 Mil.
Property, Plant and Equipment(Net PPE) was $3,004 Mil.
Depreciation, Depletion and Amortization(DDA) was $246 Mil.
Selling, General & Admin. Expense(SGA) was $225 Mil.
Total Current Liabilities was $523 Mil.
Long-Term Debt was $758 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)
=(809.73 / 5075.456) / (424.443 / 4463.336)
=0.15953837 / 0.09509546
=1.6777

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)
=(1185.191 / 4463.336) / (980.562 / 5075.456)
=0.26553927 / 0.19319683
=1.3744

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 - (2408.316 + 6420.062) / 10890.253) / (1 - (2175.189 + 3004.067) / 5569.285)
=0.18933215 / 0.07003215
=2.7035

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
=5075.456 / 4463.336
=1.1371

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))
=(245.757 / (245.757 + 3004.067)) / (377.666 / (377.666 + 6420.062))
=0.07562163 / 0.05555768
=1.3611

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)
=(295.436 / 5075.456) / (225.364 / 4463.336)
=0.05820876 / 0.05049228
=1.1528

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)
=((3678.654 + 1183.083) / 10890.253) / ((758.148 + 522.642) / 5569.285)
=0.44643012 / 0.22997387
=1.9412

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
=(398.859 - 51.255 - 833.852) / 10890.253
=-0.0446

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.

Westlake Chemical Corp has a M-score of -1.35 signals that the company is likely to 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.

Westlake Chemical Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.27850.59171.55320.7830.91861.00661.00211.12270.79891.6777
GMI 1.87714.52550.22390.55130.98540.74830.70440.9821.12361.3744
AQI 1.82990.93010.84840.96690.81840.5181.80511.07070.82032.7035
SGI 1.28491.15670.62991.36381.14130.98651.05281.17451.01091.1371
DEPI 0.88910.98470.91410.94361.02831.10321.24320.99970.92951.3611
SGAI 0.9040.88451.41050.87050.94251.09861.15581.05731.21331.1528
LVGI 1.32630.85211.03751.12350.93840.98550.84490.86710.92151.9412
TATA 0.0205-0.0963-0.0767-0.022-0.0314-0.0702-0.036-0.0667-0.0835-0.0443
M-score -1.18-1.27-3.22-2.73-2.62-3.14-2.38-2.47-3.07-1.35

Westlake Chemical Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.21611.12271.05221.13140.80710.79890.96020.94611.95451.6777
GMI 0.93410.9821.01071.0291.03891.12361.09771.18111.31591.3744
AQI 1.08341.07071.02750.9530.71890.82030.88731.17392.85882.7035
SGI 1.17241.17451.1451.17471.09011.01090.96520.90560.93811.1371
DEPI 1.09770.99970.97620.97860.86010.92950.9911.01371.75371.3611
SGAI 1.01351.05731.14071.20811.18651.21331.1571.14641.56811.1528
LVGI 0.85520.86710.87240.91120.90150.92150.940.97011.90661.9412
TATA -0.0624-0.0671-0.0669-0.0651-0.0729-0.0837-0.0736-0.0836-0.0386-0.0446
M-score -2.36-2.47-2.58-2.52-3.03-3.07-2.89-2.85-1.23-1.35
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