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GuruFocus has detected 3 Warning Signs with Amazon.com Inc $AMZN.
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Amazon.com Inc (NAS:AMZN)
Beneish M-Score
-2.99 (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.

Amazon.com Inc has a M-score of -2.99 suggests that the company is not a manipulator.

AMZN' s Beneish M-Score Range Over the Past 10 Years
Min: -4.36   Max: 6.36
Current: -2.99

-4.36
6.36

During the past 13 years, the highest Beneish M-Score of Amazon.com Inc was 6.36. The lowest was -4.36. And the median was -2.76.


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 Amazon.com 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 * 1.1495+0.528 * 0.9489+0.404 * 0.9172+0.892 * 1.2571+0.115 * 1.0561
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0629+4.679 * -0.1789-0.327 * 0.935
=-2.99

* 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 $7,329 Mil.
Revenue was 35714 + 43741 + 32714 + 30404 = $142,573 Mil.
Gross Profit was 13274 + 14782 + 11454 + 11224 = $50,734 Mil.
Total Current Assets was $39,460 Mil.
Total Assets was $80,969 Mil.
Property, Plant and Equipment(Net PPE) was $32,632 Mil.
Depreciation, Depletion and Amortization(DDA) was $8,725 Mil.
Selling, General & Admin. Expense(SGA) was $29,077 Mil.
Total Current Liabilities was $37,399 Mil.
Long-Term Debt was $7,691 Mil.
Net Income was 724 + 749 + 252 + 857 = $2,582 Mil.
Non Operating Income was 48 + 15 + 8 + -14 = $57 Mil.
Cash Flow from Operations was -1590 + 10652 + 4486 + 3465 = $17,013 Mil.
Accounts Receivable was $5,072 Mil.
Revenue was 29128 + 35747 + 25358 + 23185 = $113,418 Mil.
Gross Profit was 10262 + 11406 + 8603 + 8025 = $38,296 Mil.
Total Current Assets was $30,513 Mil.
Total Assets was $61,128 Mil.
Property, Plant and Equipment(Net PPE) was $23,308 Mil.
Depreciation, Depletion and Amortization(DDA) was $6,682 Mil.
Selling, General & Admin. Expense(SGA) was $21,763 Mil.
Total Current Liabilities was $28,187 Mil.
Long-Term Debt was $8,219 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)
=(7329 / 142573) / (5072 / 113418)
=0.05140525 / 0.04471953
=1.1495

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)
=(38296 / 113418) / (50734 / 142573)
=0.33765364 / 0.35584578
=0.9489

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 - (39460 + 32632) / 80969) / (1 - (30513 + 23308) / 61128)
=0.10963455 / 0.11953606
=0.9172

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
=142573 / 113418
=1.2571

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))
=(6682 / (6682 + 23308)) / (8725 / (8725 + 32632))
=0.2228076 / 0.21096791
=1.0561

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)
=(29077 / 142573) / (21763 / 113418)
=0.20394465 / 0.19188312
=1.0629

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)
=((7691 + 37399) / 80969) / ((8219 + 28187) / 61128)
=0.55687979 / 0.59556995
=0.935

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
=(2582 - 57 - 17013) / 80969
=-0.1789

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.

Amazon.com Inc has a M-score of -2.99 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.

Amazon.com Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.27570.9080.93421.1511.15261.16831.02480.9850.83781.1606
GMI 1.01441.01410.98731.00990.99580.90650.90910.92350.89230.9415
AQI 0.9821.30641.25920.71060.9510.96720.88520.99810.97640.9167
SGI 1.3851.29191.27881.39561.40561.27071.21871.19521.20251.2708
DEPI 0.99321.23951.10771.19220.96730.84111.02231.04770.97851.0246
SGAI 0.97130.80011.34910.94471.11080.93171.2971.08431.01951.0518
LVGI 0.89570.81410.86841.06261.10131.08690.99991.06170.99710.9535
TATA -0.1419-0.1322-0.1751-0.1287-0.1324-0.1271-0.1261-0.1278-0.171-0.1723
M-score -2.51-2.67-3.02-2.69-2.68-2.78-2.99-2.99-3.32-2.95

Amazon.com Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.9851.02761.01781.05430.83780.86180.98340.94861.16061.1495
GMI 0.92350.9160.9050.88150.89230.89760.9090.93560.94150.9489
AQI 0.99810.97690.93950.7890.97640.93280.94030.95370.91670.9172
SGI 1.19521.17721.17181.181.20251.23331.25911.27241.27081.2571
DEPI 1.04770.99820.97970.97070.97851.01181.01091.02161.02461.0561
SGAI 1.08431.08031.06421.03641.01951.01391.01581.02931.05181.0629
LVGI 1.06171.06151.06281.04790.99710.94880.94710.94770.95350.935
TATA -0.1278-0.1597-0.1696-0.1639-0.171-0.1678-0.1682-0.1793-0.1723-0.1789
M-score -2.99-3.13-3.21-3.21-3.32-3.25-3.11-3.16-2.95-2.99
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