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GuruFocus has detected 2 Warning Signs with Avon Products Inc $AVP.
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Avon Products Inc (NYSE:AVP)
Beneish M-Score
-2.57 (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.

Avon Products Inc has a M-score of -2.57 suggests that the company is not a manipulator.

AVP' s Beneish M-Score Range Over the Past 10 Years
Min: -4.44   Max: -1.99
Current: -2.57

-4.44
-1.99

During the past 13 years, the highest Beneish M-Score of Avon Products Inc was -1.99. The lowest was -4.44. And the median was -2.54.


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 Avon Products 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 * 1.0997+0.528 * 0.9916+0.404 * 1.1756+0.892 * 0.9712+0.115 * 1.0122
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9671+4.679 * -0.0524-0.327 * 0.9394
=-2.57

* 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 $457 Mil.
Revenue was 1333.1 + 1568.1 + 1408.8 + 1434.3 = $5,744 Mil.
Gross Profit was 816 + 945.8 + 857.9 + 869.3 = $3,489 Mil.
Total Current Assets was $1,949 Mil.
Total Assets was $3,426 Mil.
Property, Plant and Equipment(Net PPE) was $733 Mil.
Depreciation, Depletion and Amortization(DDA) was $114 Mil.
Selling, General & Admin. Expense(SGA) was $3,146 Mil.
Total Current Liabilities was $1,451 Mil.
Long-Term Debt was $1,875 Mil.
Net Income was -36.5 + -10.7 + 36 + 33 = $22 Mil.
Non Operating Income was -5 + -30.9 + -6.5 + 4.7 = $-38 Mil.
Cash Flow from Operations was -80.2 + 232.3 + 25.9 + 61.1 = $239 Mil.
Accounts Receivable was $428 Mil.
Revenue was 1306.5 + 1607.3 + 1436.2 + 1564.9 = $5,915 Mil.
Gross Profit was 787.7 + 943.6 + 877.2 + 953.9 = $3,562 Mil.
Total Current Assets was $2,210 Mil.
Total Assets was $3,629 Mil.
Property, Plant and Equipment(Net PPE) was $749 Mil.
Depreciation, Depletion and Amortization(DDA) was $118 Mil.
Selling, General & Admin. Expense(SGA) was $3,350 Mil.
Total Current Liabilities was $1,605 Mil.
Long-Term Debt was $2,145 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)
=(457 / 5744.3) / (427.9 / 5914.9)
=0.07955713 / 0.07234273
=1.0997

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)
=(3562.4 / 5914.9) / (3489 / 5744.3)
=0.60227561 / 0.60738471
=0.9916

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 - (1948.9 + 732.9) / 3426.2) / (1 - (2209.7 + 748.7) / 3629.1)
=0.21726694 / 0.18481166
=1.1756

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
=5744.3 / 5914.9
=0.9712

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))
=(118 / (118 + 748.7)) / (113.9 / (113.9 + 732.9))
=0.13614861 / 0.13450638
=1.0122

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)
=(3146.2 / 5744.3) / (3349.8 / 5914.9)
=0.54770816 / 0.56633248
=0.9671

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)
=((1874.9 + 1450.9) / 3426.2) / ((2145 + 1605.1) / 3629.1)
=0.9706964 / 1.0333416
=0.9394

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
=(21.8 - -37.7 - 239.1) / 3426.2
=-0.0524

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.

Avon Products Inc has a M-score of -2.57 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.

Avon Products Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.9910.80431.16621.01380.90191.03451.12140.8471.06671.1161
GMI 1.00260.95571.00870.99550.99091.03670.97571.03251.00630.9964
AQI 1.05211.19670.87121.55631.01930.97820.9781.04640.73721.0621
SGI 1.14541.07560.95461.06441.02180.95470.80190.90010.80550.9281
DEPI 1.06760.97061.14680.99730.86671.00911.02960.84540.99461.0231
SGAI 0.9780.98151.04221.00491.01171.04181.00060.98561.04560.9545
LVGI 1.09840.96390.93121.0030.99131.05371.00881.11211.37330.8757
TATA -0.00920.0271-0.0218-0.0052-0.0138-0.0801-0.055-0.0961-0.3116-0.0192
M-score -2.40-2.40-2.48-2.21-2.63-2.88-2.82-3.18-4.28-2.45

Avon Products Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.8470.94431.02131.08131.06670.99650.98391.06191.11611.0997
GMI 1.03250.98410.99340.99481.00631.03021.02231.01850.99640.9916
AQI 1.04640.92190.78130.4180.73720.7370.88181.57281.06211.1756
SGI 0.90010.85310.80880.73720.80550.8430.90481.01160.92810.9712
DEPI 0.84540.88910.91590.95150.99460.9550.87880.85811.02311.0122
SGAI 0.98560.98030.940.98511.04561.01861.03510.98780.95450.9671
LVGI 1.11211.1391.14661.36791.37331.19451.16050.94020.87570.9394
TATA -0.0961-0.1026-0.0915-0.3075-0.3116-0.301-0.2981-0.0876-0.0192-0.0524
M-score -3.18-3.24-3.20-4.44-4.28-4.19-4.08-2.58-2.45-2.57
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