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Watsco Inc (NYSE:WSO)
Beneish M-Score
-2.80 (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.

Watsco Inc has a M-score of -2.80 suggests that the company is not a manipulator.

WSO' s Beneish M-Score Range Over the Past 10 Years
Min: -2.97   Max: -1.01
Current: -2.8

-2.97
-1.01

During the past 13 years, the highest Beneish M-Score of Watsco Inc was -1.01. The lowest was -2.97. And the median was -2.51.


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 Watsco 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 * 0.9874+0.528 * 1.0014+0.404 * 1.002+0.892 * 1.0253+0.115 * 0.943
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0043+4.679 * -0.0806-0.327 * 0.8563
=-2.80

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Jun16) TTM:Last Year (Jun15) TTM:
Accounts Receivable was $607 Mil.
Revenue was 1214.435 + 851.424 + 903.816 + 1177.012 = $4,147 Mil.
Gross Profit was 291.861 + 212.447 + 222.041 + 285.846 = $1,012 Mil.
Total Current Assets was $1,407 Mil.
Total Assets was $2,020 Mil.
Property, Plant and Equipment(Net PPE) was $60 Mil.
Depreciation, Depletion and Amortization(DDA) was $20 Mil.
Selling, General & Admin. Expense(SGA) was $679 Mil.
Total Current Liabilities was $407 Mil.
Long-Term Debt was $267 Mil.
Net Income was 64.621 + 25.537 + 26.49 + 57.968 = $175 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 0.081 + 41.852 + 121.625 + 173.885 = $337 Mil.
Accounts Receivable was $599 Mil.
Revenue was 1223.439 + 808.972 + 876.787 + 1134.999 = $4,044 Mil.
Gross Profit was 295.245 + 204.225 + 214.295 + 274.765 = $989 Mil.
Total Current Assets was $1,441 Mil.
Total Assets was $2,067 Mil.
Property, Plant and Equipment(Net PPE) was $61 Mil.
Depreciation, Depletion and Amortization(DDA) was $18 Mil.
Selling, General & Admin. Expense(SGA) was $659 Mil.
Total Current Liabilities was $372 Mil.
Long-Term Debt was $433 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)
=(606.51 / 4146.687) / (599.071 / 4044.197)
=0.14626375 / 0.14813101
=0.9874

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)
=(988.53 / 4044.197) / (1012.195 / 4146.687)
=0.24443171 / 0.24409728
=1.0014

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 - (1406.825 + 60.311) / 2019.591) / (1 - (1441.41 + 60.989) / 2066.555)
=0.27354796 / 0.27299346
=1.002

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
=4146.687 / 4044.197
=1.0253

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))
=(18.489 / (18.489 + 60.989)) / (19.751 / (19.751 + 60.311))
=0.23263041 / 0.24669631
=0.943

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)
=(679.056 / 4146.687) / (659.449 / 4044.197)
=0.16375868 / 0.16306055
=1.0043

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)
=((267.348 + 406.549) / 2019.591) / ((433.412 + 371.898) / 2066.555)
=0.33367994 / 0.38968718
=0.8563

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
=(174.616 - 0 - 337.443) / 2019.591
=-0.0806

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.

Watsco Inc has a M-score of -2.80 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 own currency.

Watsco Inc Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.86741.01190.87691.49470.80631.0261.00010.96991.03130.9962
GMI 0.97751.01540.97811.08231.01490.96771.03060.98790.99080.99
AQI 0.95891.32191.04980.97650.92751.06181.17420.9740.8970.9397
SGI 1.06810.99260.96711.17741.4211.04681.15241.09081.05381.0428
DEPI 1.21481.11250.85221.10340.79871.11960.8460.96551.11731.0747
SGAI 1.00051.05121.05720.98880.89370.99590.96650.97670.98320.9884
LVGI 0.80680.94010.73281.13551.09390.78842.02320.7981.16050.8749
TATA 0.0195-0.0567-0.0742-0.0387-0.05820.0229-0.0416-0.01350.0036-0.0271
M-score -2.39-2.58-2.90-2.04-2.61-2.22-2.80-2.44-2.47-2.55

Watsco Inc Quarterly Data

Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16
DSRI 0.960.98591.01851.03131.05031.03490.96740.99621.02130.9874
GMI 0.99380.99570.99380.99080.98670.98440.98720.990.99721.0014
AQI 0.93470.94730.91840.8970.8920.90660.92580.93970.98891.002
SGI 1.07991.06121.0581.05381.05241.05261.04911.04281.04131.0253
DEPI 0.98871.01751.00851.11731.13311.21731.23261.07471.06310.943
SGAI 0.97510.9850.98760.98320.97960.97830.98030.98840.98941.0043
LVGI 0.89250.92851.10941.16051.13091.05630.90540.87490.84460.8563
TATA -0.0328-0.01310.0020.00360.02880.015-0.0168-0.0271-0.0557-0.0806
M-score -2.59-2.50-2.47-2.47-2.33-2.37-2.52-2.55-2.63-2.80
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