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GuruFocus has detected 4 Warning Signs with Wal-Mart Stores Inc $WMT.
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Wal-Mart Stores Inc (NYSE:WMT)
Beneish M-Score
-2.82 (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.

Wal-Mart Stores Inc has a M-score of -2.82 suggests that the company is not a manipulator.

WMT' s Beneish M-Score Range Over the Past 10 Years
Min: -2.99   Max: -1.36
Current: -2.82

-2.99
-1.36

During the past 13 years, the highest Beneish M-Score of Wal-Mart Stores Inc was -1.36. The lowest was -2.99. And the median was -2.56.


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 Wal-Mart Stores 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 * 1.0295+0.528 * 0.9797+0.404 * 1.1855+0.892 * 1.0078+0.115 * 0.9252
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0415+4.679 * -0.09-0.327 * 1.0065
=-2.82

* 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 $5,835 Mil.
Revenue was 130936 + 118179 + 120854 + 115904 = $485,873 Mil.
Gross Profit was 33193 + 30695 + 31369 + 29360 = $124,617 Mil.
Total Current Assets was $57,689 Mil.
Total Assets was $198,825 Mil.
Property, Plant and Equipment(Net PPE) was $114,178 Mil.
Depreciation, Depletion and Amortization(DDA) was $10,080 Mil.
Selling, General & Admin. Expense(SGA) was $101,853 Mil.
Total Current Liabilities was $66,928 Mil.
Long-Term Debt was $42,018 Mil.
Net Income was 3757 + 3034 + 3773 + 3079 = $13,643 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 11886 + 4713 + 8738 + 6193 = $31,530 Mil.
Accounts Receivable was $5,624 Mil.
Revenue was 129667 + 117408 + 120229 + 114826 = $482,130 Mil.
Gross Profit was 32668 + 29962 + 30173 + 28343 = $121,146 Mil.
Total Current Assets was $60,239 Mil.
Total Assets was $199,581 Mil.
Property, Plant and Equipment(Net PPE) was $116,516 Mil.
Depreciation, Depletion and Amortization(DDA) was $9,454 Mil.
Selling, General & Admin. Expense(SGA) was $97,041 Mil.
Total Current Liabilities was $64,619 Mil.
Long-Term Debt was $44,030 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)
=(5835 / 485873) / (5624 / 482130)
=0.01200931 / 0.0116649
=1.0295

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)
=(121146 / 482130) / (124617 / 485873)
=0.25127248 / 0.2564806
=0.9797

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 - (57689 + 114178) / 198825) / (1 - (60239 + 116516) / 199581)
=0.13558657 / 0.1143696
=1.1855

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
=485873 / 482130
=1.0078

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))
=(9454 / (9454 + 116516)) / (10080 / (10080 + 114178))
=0.07504961 / 0.08112154
=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)
=(101853 / 485873) / (97041 / 482130)
=0.20962885 / 0.20127559
=1.0415

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)
=((42018 + 66928) / 198825) / ((44030 + 64619) / 199581)
=0.5479492 / 0.54438549
=1.0065

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
=(13643 - 0 - 31530) / 198825
=-0.09

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.

Wal-Mart Stores Inc has a M-score of -2.82 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.

Wal-Mart Stores Inc Annual Data

Jan08Jan09Jan10Jan11Jan12Jan13Jan14Jan15Jan16Jan17
DSRI 1.18041.00351.05161.1881.10221.08610.97070.99560.83581.0295
GMI 0.99520.98120.97681.00221.01471.00591.00020.99990.9880.9797
AQI 1.24840.86531.02230.9821.16730.9660.96110.92380.98791.1855
SGI 1.08641.06841.00921.03371.05851.04961.01631.01960.99271.0078
DEPI 0.92070.95941.00660.98850.98270.99370.96820.95970.97140.9252
SGAI 1.01091.03391.0180.98830.98730.99311.01421.00291.04641.0415
LVGI 1.02770.97940.98041.04970.99850.98580.99780.96071.01871.0065
TATA -0.0466-0.0596-0.0697-0.0402-0.0442-0.0423-0.0353-0.06-0.0636-0.09
M-score -2.38-2.76-2.75-2.49-2.46-2.56-2.68-2.77-2.96-2.82

Wal-Mart Stores Inc Quarterly Data

Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17
DSRI 0.96230.99560.93720.84920.82250.83580.89661.00371.0651.0295
GMI 1.00580.99990.99830.99710.99160.9880.9830.9750.97570.9797
AQI 0.96420.92380.91840.96810.95990.98791.01841.01491.21911.1855
SGI 1.01991.01961.01751.01071.00050.99270.99520.99631.00121.0078
DEPI 0.96370.95970.9540.95240.97950.97140.9790.95370.93970.9252
SGAI 1.01551.00291.00711.01351.02321.04641.05221.05461.0551.0415
LVGI 0.96290.96070.97780.98471.00241.01871.021.02931.00511.0065
TATA -0.0461-0.06-0.0546-0.0568-0.0634-0.0636-0.074-0.0884-0.0849-0.09
M-score -2.72-2.77-2.81-2.89-2.97-2.96-2.95-2.92-2.76-2.82
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