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GuruFocus has detected 7 Warning Signs with Cowen Inc $COWN.
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Cowen Inc (NAS:COWN)
Beneish M-Score
-2.53 (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.

Cowen Inc has a M-score of -2.53 suggests that the company is not a manipulator.

COWN' s Beneish M-Score Range Over the Past 10 Years
Min: -6.68   Max: -0.79
Current: -2.53

-6.68
-0.79

During the past 13 years, the highest Beneish M-Score of Cowen Inc was -0.79. The lowest was -6.68. And the median was -1.81.


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 Cowen 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 * 1.0684+0.528 * 1+0.404 * 0.9795+0.892 * 1.0922+0.115 * 0.915
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.2653+4.679 * -0.0009-0.327 * 1.3883
=-2.53

* 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 $284.7 Mil.
Revenue was 114.971 + 122.268 + 131.027 + 117.231 = $485.5 Mil.
Gross Profit was 114.971 + 122.268 + 131.027 + 117.231 = $485.5 Mil.
Total Current Assets was $1,287.6 Mil.
Total Assets was $2,041.5 Mil.
Property, Plant and Equipment(Net PPE) was $40.8 Mil.
Depreciation, Depletion and Amortization(DDA) was $12.7 Mil.
Selling, General & Admin. Expense(SGA) was $476.4 Mil.
Total Current Liabilities was $533.5 Mil.
Long-Term Debt was $0.0 Mil.
Net Income was 2.984 + -1.904 + -3.219 + -10.456 = $-12.6 Mil.
Non Operating Income was 32.319 + 23.547 + 46.44 + -44.301 = $58.0 Mil.
Cash Flow from Operations was -54.709 + -15.362 + 19.197 + -17.989 = $-68.9 Mil.
Accounts Receivable was $244.0 Mil.
Revenue was 101.039 + 110.611 + 113.254 + 119.608 = $444.5 Mil.
Gross Profit was 101.039 + 110.611 + 113.254 + 119.608 = $444.5 Mil.
Total Current Assets was $1,168.6 Mil.
Total Assets was $1,874.9 Mil.
Property, Plant and Equipment(Net PPE) was $37.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $10.4 Mil.
Selling, General & Admin. Expense(SGA) was $344.7 Mil.
Total Current Liabilities was $138.6 Mil.
Long-Term Debt was $214.3 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)
=(284.674 / 485.497) / (243.959 / 444.512)
=0.58635584 / 0.54882433
=1.0684

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)
=(444.512 / 444.512) / (485.497 / 485.497)
=1 / 1
=1

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 - (1287.575 + 40.836) / 2041.547) / (1 - (1168.585 + 37.684) / 1874.936)
=0.34931158 / 0.35663457
=0.9795

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
=485.497 / 444.512
=1.0922

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))
=(10.427 / (10.427 + 37.684)) / (12.674 / (12.674 + 40.836))
=0.21672798 / 0.23685292
=0.915

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)
=(476.403 / 485.497) / (344.73 / 444.512)
=0.98126868 / 0.77552462
=1.2653

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)
=((0 + 533.481) / 2041.547) / ((214.332 + 138.569) / 1874.936)
=0.26131213 / 0.18822029
=1.3883

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
=(-12.595 - 58.005 - -68.863) / 2041.547
=-0.0009

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.

Cowen Inc has a M-score of -2.53 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.

Cowen Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 2.96151.02061.09560.70071.21570.87921.04821.02770.8391
GMI 111111111
AQI 3.17590.09234.64340.56910.87420.8571.18142.49381.1232
SGI 0.48830.971.88211.0091.02651.35371.30841.0861.0151
DEPI 1.55770.92730.62720.57051.85480.8250.98631.07711.1212
SGAI 1.27611.34551.01761.18520.82910.81050.94680.88751.2073
LVGI 2.36871.42171.9711.14651.07440.16422.94761.45170.9467
TATA 0.1974-0.1565-0.0199-0.23430.0267-0.08550.06730.0420.1541
M-score 0.24-3.79-0.59-4.15-2.08-2.45-2.40-1.70-1.85

Cowen Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.04821.09860.82420.98451.02770.94610.94990.82370.83911.0684
GMI 1111111111
AQI 1.18142.60623.33283.43982.49381.33171.95311.86931.12320.9795
SGI 1.30841.20691.24021.17871.0861.00520.94290.96811.01511.0922
DEPI 0.98630.92460.91220.97411.07711.3131.37981.17651.12120.915
SGAI 0.94681.04971.01610.87430.88750.81120.79221.17051.20731.2653
LVGI 2.94760.51513.15392.63711.45170.48620.48760.71480.94671.3883
TATA 0.06730.06790.11220.13410.0420.21130.19290.12520.1541-0.0009
M-score -2.40-1.10-1.68-1.24-1.70-1.17-1.04-1.65-1.85-2.53
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