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GuruFocus has detected 5 Warning Signs with Applied Materials Inc $AMAT.
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Applied Materials Inc (NAS:AMAT)
Beneish M-Score
-2.58 (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.

Applied Materials Inc has a M-score of -2.58 suggests that the company is not a manipulator.

AMAT' s Beneish M-Score Range Over the Past 10 Years
Min: -3.58   Max: 0.09
Current: -2.58

-3.58
0.09

During the past 13 years, the highest Beneish M-Score of Applied Materials Inc was 0.09. The lowest was -3.58. And the median was -2.42.


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 Applied Materials 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 * 0.9199+0.528 * 0.9356+0.404 * 0.6918+0.892 * 1.3531+0.115 * 1.0202
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8138+4.679 * -0.0373-0.327 * 1.1316
=-2.58

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

This Year (Apr17) TTM:Last Year (Apr16) TTM:
Accounts Receivable was $2,381 Mil.
Revenue was 3546 + 3278 + 3297 + 2821 = $12,942 Mil.
Gross Profit was 1600 + 1445 + 1399 + 1192 = $5,636 Mil.
Total Current Assets was $12,018 Mil.
Total Assets was $18,240 Mil.
Property, Plant and Equipment(Net PPE) was $969 Mil.
Depreciation, Depletion and Amortization(DDA) was $397 Mil.
Selling, General & Admin. Expense(SGA) was $882 Mil.
Total Current Liabilities was $4,097 Mil.
Long-Term Debt was $5,302 Mil.
Net Income was 824 + 703 + 610 + 505 = $2,642 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 898 + 646 + 797 + 981 = $3,322 Mil.
Accounts Receivable was $1,913 Mil.
Revenue was 2450 + 2257 + 2368 + 2490 = $9,565 Mil.
Gross Profit was 1004 + 916 + 959 + 1018 = $3,897 Mil.
Total Current Assets was $6,728 Mil.
Total Assets was $13,075 Mil.
Property, Plant and Equipment(Net PPE) was $904 Mil.
Depreciation, Depletion and Amortization(DDA) was $381 Mil.
Selling, General & Admin. Expense(SGA) was $801 Mil.
Total Current Liabilities was $2,611 Mil.
Long-Term Debt was $3,343 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)
=(2381 / 12942) / (1913 / 9565)
=0.18397466 / 0.2
=0.9199

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)
=(3897 / 9565) / (5636 / 12942)
=0.4074229 / 0.43548138
=0.9356

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 - (12018 + 969) / 18240) / (1 - (6728 + 904) / 13075)
=0.28799342 / 0.41629063
=0.6918

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
=12942 / 9565
=1.3531

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))
=(381 / (381 + 904)) / (397 / (397 + 969))
=0.29649805 / 0.29062958
=1.0202

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)
=(882 / 12942) / (801 / 9565)
=0.06815021 / 0.08374281
=0.8138

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)
=((5302 + 4097) / 18240) / ((3343 + 2611) / 13075)
=0.51529605 / 0.45537285
=1.1316

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
=(2642 - 0 - 3322) / 18240
=-0.0373

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.

Applied Materials Inc has a M-score of -2.58 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.

Applied Materials Inc Annual Data

Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Oct15Oct16
DSRI 0.95250.98810.99860.9230.75980.96051.55420.84650.9781.1694
GMI 1.01451.08971.4840.73360.93831.09080.95420.94031.03530.9818
AQI 1.12421.04760.98921.00640.64832.64210.9160.88040.82981.0785
SGI 1.06190.83510.61671.90481.10120.82910.86121.20821.06471.1207
DEPI 1.02710.89861.07370.87621.08730.69830.97361.07251.03291.0013
SGAI 0.98911.21351.2340.67330.86961.43880.96150.85930.91080.8147
LVGI 0.87011.17990.78171.26411.21051.01731.04740.99351.28820.9957
TATA -0.0441-0.0649-0.0542-0.0706-0.0361-0.1439-0.0305-0.05530.014-0.0511
M-score -2.57-2.98-2.79-2.26-2.99-2.75-2.31-2.74-2.50-2.40

Applied Materials Inc Quarterly Data

Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17Apr17
DSRI 0.92011.0151.130.9780.99451.03780.89811.16941.17610.9199
GMI 0.95960.97591.01121.03531.03471.03281.00540.98180.96140.9356
AQI 0.92210.9160.95260.82981.02421.07670.99081.07850.82550.6918
SGI 1.13721.09691.08631.06471.03421.02521.03571.12071.23951.3531
DEPI 1.0611.05871.04631.03291.03170.99090.98831.00131.00351.0202
SGAI 0.91290.96850.96310.91080.89680.83390.77650.81470.80210.8138
LVGI 0.94260.93090.9491.28821.24051.33261.3260.99571.07271.1316
TATA -0.0246-0.00590.01510.0140.0004-0.017-0.0506-0.0511-0.0503-0.0373
M-score -2.56-2.42-2.20-2.50-2.48-2.54-2.85-2.40-2.42-2.58
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