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GuruFocus has detected 2 Warning Signs with Adtran Inc $ADTN.
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Adtran Inc (NAS:ADTN)
Beneish M-Score
-2.38 (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.

Adtran Inc has a M-score of -2.38 suggests that the company is not a manipulator.

ADTN' s Beneish M-Score Range Over the Past 10 Years
Min: -14529.48   Max: 14881.24
Current: -2.38

-14529.48
14881.24

During the past 13 years, the highest Beneish M-Score of Adtran Inc was 14881.24. The lowest was -14529.48. And the median was -2.55.


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 Adtran 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 * 1.1408+0.528 * 0.99+0.404 * 0.9399+0.892 * 1.1091+0.115 * 1.0201
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9932+4.679 * -0.009-0.327 * 1.1865
=-2.38

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

This Year (Mar17) TTM:Last Year (Mar16) TTM:
Accounts Receivable was USD 85.4 Mil.
Revenue was 170.279 + 162.986 + 168.89 + 162.701 = USD 664.9 Mil.
Gross Profit was 73.715 + 70.787 + 75.808 + 78.955 = USD 299.3 Mil.
Total Current Assets was USD 354.4 Mil.
Total Assets was USD 667.2 Mil.
Property, Plant and Equipment(Net PPE) was USD 83.5 Mil.
Depreciation, Depletion and Amortization(DDA) was USD 15.4 Mil.
Selling, General & Admin. Expense(SGA) was USD 135.8 Mil.
Total Current Liabilities was USD 121.6 Mil.
Long-Term Debt was USD 26.8 Mil.
Net Income was 6.651 + 7.572 + 12.415 + 10.228 = USD 36.9 Mil.
Non Operating Income was 0.521 + 1.488 + 4.62 + 0.859 = USD 7.5 Mil.
Cash Flow from Operations was 9.037 + 14.168 + 7.215 + 4.941 = USD 35.4 Mil.
Accounts Receivable was USD 67.5 Mil.
Revenue was 142.204 + 139.013 + 158.078 + 160.138 = USD 599.4 Mil.
Gross Profit was 65.794 + 62.439 + 70.649 + 68.246 = USD 267.1 Mil.
Total Current Assets was USD 320.8 Mil.
Total Assets was USD 621.5 Mil.
Property, Plant and Equipment(Net PPE) was USD 73.5 Mil.
Depreciation, Depletion and Amortization(DDA) was USD 13.9 Mil.
Selling, General & Admin. Expense(SGA) was USD 123.3 Mil.
Total Current Liabilities was USD 88.6 Mil.
Long-Term Debt was USD 27.9 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)
=(85.396 / 664.856) / (67.492 / 599.433)
=0.12844285 / 0.11259307
=1.1408

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)
=(267.128 / 599.433) / (299.265 / 664.856)
=0.44563446 / 0.45012003
=0.99

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 - (354.4 + 83.514) / 667.178) / (1 - (320.773 + 73.511) / 621.494)
=0.34363243 / 0.3655868
=0.9399

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
=664.856 / 599.433
=1.1091

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))
=(13.864 / (13.864 + 73.511)) / (15.383 / (15.383 + 83.514))
=0.15867239 / 0.15554567
=1.0201

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)
=(135.787 / 664.856) / (123.263 / 599.433)
=0.2042352 / 0.20563266
=0.9932

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)
=((26.8 + 121.629) / 667.178) / ((27.9 + 88.634) / 621.494)
=0.22247286 / 0.18750623
=1.1865

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
=(36.866 - 7.488 - 35.361) / 667.178
=-0.009

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.

Adtran Inc has a M-score of -2.38 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.

Adtran Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.23420.71081.33390.83290.90681.20951.04161.05050.85321.21
GMI 0.99430.99421.00731.00031.02571.13221.060.9741.1110.9721
AQI 0.64451.34950.94921.30581.12930.94881.03651.00280.92470.8799
SGI 1.00861.05010.96711.25091.18420.86531.0340.98170.95251.0612
DEPI 0.82551.24380.96950.95780.94160.88760.93230.96711.01661.1176
SGAI 0.99510.95190.99560.9220.91941.24490.931.0390.98291.0054
LVGI 1.04870.97650.90690.83230.94171.29231.09681.06430.95181.2066
TATA -0.0309-0.075-0.02620.0159-0.0289-0.0567-0.0274-0.0266-0.0139-0.0234
M-score -2.58-2.87-2.31-2.15-2.44-2.77-2.52-2.62-2.67-2.46

Adtran Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.05050.93270.8340.9250.85320.77551.01641.16661.211.1408
GMI 0.9741.02721.06771.09861.1111.07240.99680.97690.97210.99
AQI 1.00280.85060.80260.82490.92471.01110.96880.90350.87990.9399
SGI 0.98170.96920.92450.93790.95250.95780.98711.01291.06121.1091
DEPI 0.96710.95460.98360.9971.01661.06191.06761.09811.11761.0201
SGAI 1.0391.00371.030.99870.98290.9970.98591.00871.00540.9932
LVGI 1.06431.13951.2021.18480.95180.86790.84350.94381.20661.1865
TATA -0.0266-0.0397-0.0531-0.0391-0.0139-0.01420.00620.0025-0.0234-0.009
M-score -2.62-2.85-3.07-2.87-2.67-2.70-2.40-2.33-2.46-2.38
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