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GuruFocus has detected 7 Warning Signs with Aetna Inc $AET.
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Aetna Inc (NYSE:AET)
Beneish M-Score
-2.51 (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.

Aetna Inc has a M-score of -2.51 suggests that the company is not a manipulator.

AET' s Beneish M-Score Range Over the Past 10 Years
Min: -3.1   Max: 1.64
Current: -2.51

-3.1
1.64

During the past 13 years, the highest Beneish M-Score of Aetna Inc was 1.64. The lowest was -3.10. And the median was -2.58.


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 Aetna 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 * 1.08+0.528 * 1.0473+0.404 * 1.0098+0.892 * 1.0277+0.115 * 0.9724
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0881+4.679 * -0.0233-0.327 * 1.0972
=-2.51

* 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 $5,417 Mil.
Revenue was 15165 + 15727.8 + 15781.5 + 15952.3 = $62,627 Mil.
Gross Profit was 3704 + 4132.7 + 4154.8 + 4194.7 = $16,186 Mil.
Total Current Assets was $15,018 Mil.
Total Assets was $56,351 Mil.
Property, Plant and Equipment(Net PPE) was $577 Mil.
Depreciation, Depletion and Amortization(DDA) was $672 Mil.
Selling, General & Admin. Expense(SGA) was $13,074 Mil.
Total Current Liabilities was $19,548 Mil.
Long-Term Debt was $8,174 Mil.
Net Income was -381 + 139.4 + 603.9 + 790.8 = $1,153 Mil.
Non Operating Income was -306 + -60.5 + -61.4 + 65.7 = $-362 Mil.
Cash Flow from Operations was 899 + -902 + 2411.2 + 418.8 = $2,827 Mil.
Accounts Receivable was $4,880 Mil.
Revenue was 15693 + 15049 + 14953 + 15240.9 = $60,936 Mil.
Gross Profit was 4316 + 3958.4 + 4014.7 + 4205.4 = $16,495 Mil.
Total Current Assets was $15,394 Mil.
Total Assets was $56,424 Mil.
Property, Plant and Equipment(Net PPE) was $616 Mil.
Depreciation, Depletion and Amortization(DDA) was $676 Mil.
Selling, General & Admin. Expense(SGA) was $11,692 Mil.
Total Current Liabilities was $17,915 Mil.
Long-Term Debt was $7,383 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)
=(5417 / 62626.6) / (4880.4 / 60935.9)
=0.08649679 / 0.08009072
=1.08

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)
=(16494.5 / 60935.9) / (16186.2 / 62626.6)
=0.27068608 / 0.25845567
=1.0473

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 - (15018 + 577) / 56351) / (1 - (15393.6 + 616.1) / 56423.7)
=0.72325247 / 0.7162593
=1.0098

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
=62626.6 / 60935.9
=1.0277

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))
=(676 / (676 + 616.1)) / (672 / (672 + 577))
=0.52317932 / 0.53803042
=0.9724

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)
=(13074.4 / 62626.6) / (11691.5 / 60935.9)
=0.20876752 / 0.19186555
=1.0881

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)
=((8174 + 19548) / 56351) / ((7382.5 + 17915.2) / 56423.7)
=0.49195223 / 0.44835238
=1.0972

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
=(1153.1 - -362.2 - 2827) / 56351
=-0.0233

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.

Aetna Inc has a M-score of -2.51 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.

Aetna Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.03450.84090.66461.15770.92781.02241.70871.00310.91950.9922
GMI 2.15211.74821.07130.89310.91541.02261.16490.97910.95121.0284
AQI 0.99150.95590.94990.99191.04030.94641.00510.96820.97820.773
SGI 1.09761.12141.12320.98510.98651.08341.29221.22641.04021.0467
DEPI 1.04071.04861.03970.94261.02480.97991.0310.91020.9390.9603
SGAI 0.95381.01630.98811.03681.05810.93280.9731.02171.03330.9915
LVGI 1.06361.46450.9971.04021.00031.11081.13591.06341.0061.2478
TATA -0.0073-0.0295-0.03770.0119-0.01050.0241-0.0048-0.017-0.0228-0.0192
M-score -1.80-2.43-2.83-2.38-2.64-2.31-1.54-2.41-2.67-2.70

Aetna Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.00312.70971.12851.22020.91950.89970.97011.09340.99221.08
GMI 0.97910.97430.94770.9520.95120.97371.00711.01851.02841.0473
AQI 0.96820.97340.9770.98210.97820.95880.77140.75940.7731.0098
SGI 1.22641.14211.09341.06461.04021.0311.03031.04021.04671.0277
DEPI 0.91020.95040.96760.94750.9390.93780.93840.95970.96030.9724
SGAI 1.02171.04791.05681.05251.03331.01260.99410.9750.99151.0881
LVGI 1.06341.0361.02021.02481.0061.01611.25361.27381.24781.0972
TATA -0.017-0.0169-0.0062-0.0076-0.0228-0.028-0.0257-0.0439-0.0192-0.0233
M-score -2.41-0.91-2.36-2.31-2.67-2.72-2.78-2.74-2.70-2.51
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