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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.
During the past 13 years, the highest Beneish M-Score of Weight Watchers International Inc was -1.89. The lowest was -3.24. And the median was -2.83.
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 Weight Watchers International 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 * 1.0943||+||0.528 * 1.075||+||0.404 * 0.9287||+||0.892 * 0.8536||+||0.115 * 0.845|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.0666||+||4.679 * -0.0688||-||0.327 * 0.8919|
|This Year (Sep14) TTM:||Last Year (Sep13) TTM:|
|Accounts Receivable was $32 Mil.|
Revenue was 345.184 + 397.547 + 409.358 + 366.111 = $1,518 Mil.
Gross Profit was 187.567 + 225.814 + 222.9 + 201.78 = $838 Mil.
Total Current Assets was $439 Mil.
Total Assets was $1,558 Mil.
Property, Plant and Equipment(Net PPE) was $77 Mil.
Depreciation, Depletion and Amortization(DDA) was $48 Mil.
Selling, General & Admin. Expense(SGA) was $502 Mil.
Total Current Liabilities was $378 Mil.
Long-Term Debt was $2,340 Mil.
Net Income was 37.892 + 54.002 + 21.531 + 30.798 = $144 Mil.
Non Operating Income was -1.52 + -0.889 + 10.27 + 0.203 = $8 Mil.
Cash Flow from Operations was 75.792 + 64.649 + 80.85 + 22.079 = $243 Mil.
|Accounts Receivable was $34 Mil.
Revenue was 396.334 + 470.888 + 490.79 + 420.535 = $1,779 Mil.
Gross Profit was 231.98 + 283.715 + 283.637 + 256.096 = $1,055 Mil.
Total Current Assets was $304 Mil.
Total Assets was $1,408 Mil.
Property, Plant and Equipment(Net PPE) was $89 Mil.
Depreciation, Depletion and Amortization(DDA) was $43 Mil.
Selling, General & Admin. Expense(SGA) was $551 Mil.
Total Current Liabilities was $384 Mil.
Long-Term Debt was $2,370 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(32.05 / 1518.2)||/||(34.312 / 1778.547)|
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.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(225.814 / 1778.547)||/||(187.567 / 1518.2)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (438.987 + 76.814) / 1558.33)||/||(1 - (304.412 + 89.353) / 1408.236)|
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.
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))|
|=||(43.074 / (43.074 + 89.353))||/||(48.077 / (48.077 + 76.814))|
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)|
|=||(501.908 / 1518.2)||/||(551.274 / 1778.547)|
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)|
|=||((2340 + 378.358) / 1558.33)||/||((2370 + 384.178) / 1408.236)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(144.223 - 8.064||-||243.37)||/||1558.33|
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.
Weight Watchers International Inc has a M-score of -2.83 suggests that the company will not be a manipulator.
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
Weight Watchers International Inc Annual Data
Weight Watchers International Inc Quarterly Data