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Watsco Inc (NYSE:WSO)
Beneish M-Score
-2.61 (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 -2.61 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: -2.61

-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 * 1.0427+0.528 * 1.0015+0.404 * 0.9806+0.892 * 1.0305+0.115 * 0.9134
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0021+4.679 * -0.045-0.327 * 0.895
=-2.61

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $548 Mil.
Revenue was 1241.232 + 1214.435 + 851.424 + 903.816 = $4,211 Mil.
Gross Profit was 302.204 + 291.861 + 212.447 + 222.041 = $1,029 Mil.
Total Current Assets was $1,349 Mil.
Total Assets was $1,958 Mil.
Property, Plant and Equipment(Net PPE) was $60 Mil.
Depreciation, Depletion and Amortization(DDA) was $20 Mil.
Selling, General & Admin. Expense(SGA) was $687 Mil.
Total Current Liabilities was $358 Mil.
Long-Term Debt was $219 Mil.
Net Income was 63.099 + 64.621 + 25.537 + 26.49 = $180 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 104.367 + 0.081 + 41.852 + 121.625 = $268 Mil.
Accounts Receivable was $510 Mil.
Revenue was 1177.012 + 1223.439 + 808.972 + 876.787 = $4,086 Mil.
Gross Profit was 285.846 + 295.245 + 204.225 + 214.295 = $1,000 Mil.
Total Current Assets was $1,314 Mil.
Total Assets was $1,929 Mil.
Property, Plant and Equipment(Net PPE) was $63 Mil.
Depreciation, Depletion and Amortization(DDA) was $19 Mil.
Selling, General & Admin. Expense(SGA) was $665 Mil.
Total Current Liabilities was $331 Mil.
Long-Term Debt was $305 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)
=(548 / 4210.907) / (510.004 / 4086.21)
=0.13013823 / 0.12481101
=1.0427

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)
=(999.611 / 4086.21) / (1028.553 / 4210.907)
=0.24463035 / 0.24425925
=1.0015

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 - (1349.009 + 59.729) / 1957.597) / (1 - (1314.494 + 63.297) / 1929.459)
=0.28037385 / 0.28591849
=0.9806

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
=4210.907 / 4086.21
=1.0305

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))
=(18.795 / (18.795 + 63.297)) / (19.979 / (19.979 + 59.729))
=0.22895045 / 0.25065238
=0.9134

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)
=(686.794 / 4210.907) / (665.088 / 4086.21)
=0.16309883 / 0.16276403
=1.0021

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)
=((219.4 + 358.127) / 1957.597) / ((304.941 + 331.037) / 1929.459)
=0.29501833 / 0.32961467
=0.895

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
=(179.747 - 0 - 267.925) / 1957.597
=-0.045

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 -2.61 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.

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

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
DSRI 0.98591.01851.03131.05031.03490.96740.99621.02130.98741.0427
GMI 0.99570.99380.99080.98670.98440.98720.990.99721.00141.0015
AQI 0.94730.91840.8970.8920.90660.92580.93970.98891.0020.9806
SGI 1.06121.0581.05381.05241.05261.04911.04281.04131.02531.0305
DEPI 1.01751.00851.11731.13311.21731.23261.07471.06310.9430.9134
SGAI 0.9850.98760.98320.97960.97830.98030.98840.98941.00431.0021
LVGI 0.92851.10941.16051.13091.05630.90540.87490.84460.85630.895
TATA -0.01310.0020.00360.02880.015-0.0168-0.0271-0.0557-0.0806-0.045
M-score -2.50-2.47-2.47-2.33-2.37-2.52-2.55-2.63-2.80-2.61
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