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GuruFocus has detected 5 Warning Signs with Cognizant Technology Solutions Corp $CTSH.
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Cognizant Technology Solutions Corp (NAS:CTSH)
Beneish M-Score
-2.41 (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.

Cognizant Technology Solutions Corp has a M-score of -2.41 suggests that the company is not a manipulator.

CTSH' s Beneish M-Score Range Over the Past 10 Years
Min: -2.83   Max: -0.54
Current: -2.41

-2.83
-0.54

During the past 13 years, the highest Beneish M-Score of Cognizant Technology Solutions Corp was -0.54. The lowest was -2.83. And the median was -2.28.


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 Cognizant Technology Solutions Corp 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 * 1.0474+0.528 * 1.0154+0.404 * 1.0751+0.892 * 1.0885+0.115 * 0.9145
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0005+4.679 * -0.0127-0.327 * 1.0785
=-2.41

* 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 $2,644 Mil.
Revenue was 3546 + 3461.9 + 3453.2 + 3369.9 = $13,831 Mil.
Gross Profit was 1352 + 1384.4 + 1375.8 + 1332.2 = $5,444 Mil.
Total Current Assets was $7,842 Mil.
Total Assets was $13,629 Mil.
Property, Plant and Equipment(Net PPE) was $1,306 Mil.
Depreciation, Depletion and Amortization(DDA) was $395 Mil.
Selling, General & Admin. Expense(SGA) was $2,771 Mil.
Total Current Liabilities was $2,585 Mil.
Long-Term Debt was $772 Mil.
Net Income was 557 + 415 + 444.4 + 252.4 = $1,669 Mil.
Non Operating Income was 53 + -25.5 + 7.2 + -19.3 = $15 Mil.
Cash Flow from Operations was 277 + 598.6 + 594 + 356.4 = $1,826 Mil.
Accounts Receivable was $2,319 Mil.
Revenue was 3202 + 3232.5 + 3187 + 3085.1 = $12,707 Mil.
Gross Profit was 1287 + 1299.1 + 1252.4 + 1240.3 = $5,079 Mil.
Total Current Assets was $7,571 Mil.
Total Assets was $12,736 Mil.
Property, Plant and Equipment(Net PPE) was $1,270 Mil.
Depreciation, Depletion and Amortization(DDA) was $342 Mil.
Selling, General & Admin. Expense(SGA) was $2,544 Mil.
Total Current Liabilities was $2,050 Mil.
Long-Term Debt was $858 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)
=(2644 / 13831) / (2319.1 / 12706.6)
=0.19116477 / 0.18251145
=1.0474

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)
=(5078.8 / 12706.6) / (5444.4 / 13831)
=0.39969779 / 0.39363748
=1.0154

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 - (7842 + 1306) / 13629) / (1 - (7570.9 + 1270) / 12735.9)
=0.32878421 / 0.30582841
=1.0751

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
=13831 / 12706.6
=1.0885

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))
=(342.4 / (342.4 + 1270)) / (395 / (395 + 1306))
=0.21235425 / 0.23221634
=0.9145

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)
=(2770.8 / 13831) / (2544.2 / 12706.6)
=0.20033259 / 0.20022665
=1.0005

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)
=((772 + 2585) / 13629) / ((858.4 + 2050.4) / 12735.9)
=0.24631301 / 0.22839375
=1.0785

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
=(1668.8 - 15.4 - 1826) / 13629
=-0.0127

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.

Cognizant Technology Solutions Corp has a M-score of -2.41 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.

Cognizant Technology Solutions Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.97521.00711.0511.0210.87210.9511.01791.02890.9461.0444
GMI 1.02650.98581.01291.03311.00011.01021.03231.00731.00211.0048
AQI 2.64641.45490.86580.65571.11820.93530.98682.98210.8951.0267
SGI 1.49941.31881.16421.40071.33291.20021.20371.16051.20981.0863
DEPI 1.02140.9320.90140.96711.151.0140.9730.99810.69350.9191
SGAI 0.96011.00060.95030.96211.02540.97680.92141.01591.01821.002
LVGI 0.98490.88071.18671.04841.08150.96161.03291.40960.89420.8199
TATA 0.00140.0104-0.0419-0.00480.0027-0.0158-0.0192-0.0012-0.0371-0.0028
M-score -1.36-1.93-2.59-2.26-2.25-2.42-2.36-1.65-2.56-2.31

Cognizant Technology Solutions Corp Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.02891.03961.00610.97760.9460.95260.97821.04971.04441.0474
GMI 1.00731.00961.00671.00121.00211.00431.00741.00371.00481.0154
AQI 2.98213.0053.20813.25940.8950.93870.98040.99991.02671.0751
SGI 1.16051.1631.17911.20761.20981.18181.14771.11171.08631.0885
DEPI 0.99810.91260.84010.7750.69350.74130.81970.88760.91910.9145
SGAI 1.01591.0331.04361.03791.01820.99560.98340.99171.0021.0005
LVGI 1.40961.35951.34761.3080.89420.92550.92630.92210.81991.0785
TATA -0.0012-0.00080.0001-0.0152-0.0371-0.0252-0.0289-0.0097-0.0028-0.0127
M-score -1.65-1.62-1.56-1.61-2.56-2.51-2.50-2.36-2.31-2.41
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