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GuruFocus has detected 5 Warning Signs with Brocade Communications Systems Inc $BRCD.
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Brocade Communications Systems Inc (NAS:BRCD)
Beneish M-Score
-2.49 (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.

Brocade Communications Systems Inc has a M-score of -2.49 suggests that the company is not a manipulator.

BRCD' s Beneish M-Score Range Over the Past 10 Years
Min: -10000000   Max: 0.13
Current: -2.49

-10000000
0.13

During the past 13 years, the highest Beneish M-Score of Brocade Communications Systems Inc was 0.13. The lowest was -10000000.00. And the median was -2.83.


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 Brocade Communications Systems 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 * 1.1937+0.528 * 1.0774+0.404 * 1.2438+0.892 * 1.0643+0.115 * 0.6283
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1206+4.679 * -0.0466-0.327 * 1.3167
=-2.49

* 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 $260 Mil.
Revenue was 552.753 + 581.463 + 657.299 + 590.721 = $2,382 Mil.
Gross Profit was 342.76 + 367.123 + 420.314 + 356.899 = $1,487 Mil.
Total Current Assets was $1,708 Mil.
Total Assets was $4,917 Mil.
Property, Plant and Equipment(Net PPE) was $435 Mil.
Depreciation, Depletion and Amortization(DDA) was $161 Mil.
Selling, General & Admin. Expense(SGA) was $823 Mil.
Total Current Liabilities was $689 Mil.
Long-Term Debt was $1,473 Mil.
Net Income was -10.967 + -5.681 + 66.589 + 10.495 = $60 Mil.
Non Operating Income was 0 + 0 + -0.979 + 0 = $-1 Mil.
Cash Flow from Operations was 108.05 + -2.806 + 157.034 + 28.274 = $291 Mil.
Accounts Receivable was $205 Mil.
Revenue was 523.306 + 574.284 + 588.827 + 551.819 = $2,238 Mil.
Gross Profit was 350.311 + 388.815 + 394.277 + 371.904 = $1,505 Mil.
Total Current Assets was $1,740 Mil.
Total Assets was $3,993 Mil.
Property, Plant and Equipment(Net PPE) was $442 Mil.
Depreciation, Depletion and Amortization(DDA) was $90 Mil.
Selling, General & Admin. Expense(SGA) was $690 Mil.
Total Current Liabilities was $530 Mil.
Long-Term Debt was $802 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)
=(260.343 / 2382.236) / (204.915 / 2238.236)
=0.10928514 / 0.09155201
=1.1937

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)
=(1505.307 / 2238.236) / (1487.096 / 2382.236)
=0.67254168 / 0.62424378
=1.0774

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 - (1707.57 + 434.795) / 4917.23) / (1 - (1739.677 + 441.717) / 3992.973)
=0.56431466 / 0.45369177
=1.2438

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
=2382.236 / 2238.236
=1.0643

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))
=(90.399 / (90.399 + 441.717)) / (161.15 / (161.15 + 434.795))
=0.16988589 / 0.27041086
=0.6283

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)
=(823.079 / 2382.236) / (690.124 / 2238.236)
=0.34550691 / 0.30833388
=1.1206

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)
=((1472.501 + 688.602) / 4917.23) / ((802.482 + 530.306) / 3992.973)
=0.43949602 / 0.33378337
=1.3167

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
=(60.436 - -0.979 - 290.552) / 4917.23
=-0.0466

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.

Brocade Communications Systems Inc has a M-score of -2.49 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.

Brocade Communications Systems Inc Annual Data

Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Oct15Oct16
DSRI 1.0840.76251.40750.99410.76530.8981.07780.90581.02461.1632
GMI 1.10970.91181.10830.89820.98570.96710.97510.95620.98191.0443
AQI 3.66491.46931.03040.96270.98250.88180.8950.91630.991.3166
SGI 1.64781.1861.33131.07191.02581.04210.99330.99481.02361.0363
DEPI 0.77541.19770.9011.13840.96741.03350.96461.52031.13890.7544
SGAI 1.13830.62331.67811.1371.09760.96680.94641.0011.0281.0785
LVGI 1.01821.9240.81680.85870.93780.89250.94580.99161.06071.3235
TATA -0.0561-0.0782-0.0504-0.0451-0.1145-0.1101-0.0879-0.0819-0.0266-0.0395
M-score -1.01-2.97-2.04-2.66-3.22-3.07-2.86-2.95-2.58-2.48

Brocade Communications Systems Inc Quarterly Data

Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17Apr17
DSRI 1.08650.93991.02681.02460.71641.10411.36821.16321.44331.1937
GMI 0.95980.96690.9750.98190.98780.99951.03111.04431.0631.0774
AQI 0.82710.98921.00150.991.17381.02191.28881.31661.23951.2438
SGI 1.01111.01631.01511.02361.01731.00251.0171.03631.04041.0643
DEPI 1.76351.60611.38131.13890.93610.91520.86380.75440.68390.6283
SGAI 1.0281.03521.0431.0281.02921.05161.08031.07851.11521.1206
LVGI 1.25131.09121.07691.06070.86380.98771.3841.32351.32131.3167
TATA -0.0482-0.0367-0.0229-0.0266-0.0518-0.0369-0.0414-0.0395-0.0368-0.0466
M-score -2.71-2.68-2.55-2.58-2.87-2.56-2.34-2.48-2.24-2.49
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