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GuruFocus has detected 1 Warning Sign with CVS Health Corp $CVS.
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CVS Health Corp (NYSE:CVS)
Beneish M-Score
-2.79 (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.

CVS Health Corp has a M-score of -2.79 suggests that the company is not a manipulator.

CVS' s Beneish M-Score Range Over the Past 10 Years
Min: -3.17   Max: 0.2
Current: -2.79

-3.17
0.2

During the past 13 years, the highest Beneish M-Score of CVS Health Corp was 0.20. The lowest was -3.17. And the median was -2.45.


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 CVS Health 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 * 0.8331+0.528 * 1.0548+0.404 * 0.9958+0.892 * 1.1164+0.115 * 0.9294
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9536+4.679 * -0.0582-0.327 * 1.041
=-2.79

* 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 $12,114 Mil.
Revenue was 44514 + 45971 + 44615 + 43725 = $178,825 Mil.
Gross Profit was 6580 + 7606 + 7492 + 7015 = $28,693 Mil.
Total Current Assets was $29,457 Mil.
Total Assets was $92,670 Mil.
Property, Plant and Equipment(Net PPE) was $10,057 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,477 Mil.
Selling, General & Admin. Expense(SGA) was $18,738 Mil.
Total Current Liabilities was $27,288 Mil.
Long-Term Debt was $25,622 Mil.
Net Income was 952 + 1707 + 1540 + 924 = $5,123 Mil.
Non Operating Income was -7 + 0 + -101 + -542 = $-650 Mil.
Cash Flow from Operations was 3533 + 2121 + 3925 + 1584 = $11,163 Mil.
Accounts Receivable was $13,025 Mil.
Revenue was 43215 + 41146 + 38644 + 37169 = $160,174 Mil.
Gross Profit was 6744 + 7301 + 6661 + 6402 = $27,108 Mil.
Total Current Assets was $29,413 Mil.
Total Assets was $92,634 Mil.
Property, Plant and Equipment(Net PPE) was $9,862 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,219 Mil.
Selling, General & Admin. Expense(SGA) was $17,601 Mil.
Total Current Liabilities was $24,537 Mil.
Long-Term Debt was $26,267 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)
=(12114 / 178825) / (13025 / 160174)
=0.06774221 / 0.08131782
=0.8331

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)
=(27108 / 160174) / (28693 / 178825)
=0.16924095 / 0.16045296
=1.0548

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 - (29457 + 10057) / 92670) / (1 - (29413 + 9862) / 92634)
=0.57360527 / 0.5760196
=0.9958

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
=178825 / 160174
=1.1164

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))
=(2219 / (2219 + 9862)) / (2477 / (2477 + 10057))
=0.18367685 / 0.19762247
=0.9294

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)
=(18738 / 178825) / (17601 / 160174)
=0.10478401 / 0.10988675
=0.9536

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)
=((25622 + 27288) / 92670) / ((26267 + 24537) / 92634)
=0.57095069 / 0.54843794
=1.041

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
=(5123 - -650 - 11163) / 92670
=-0.0582

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.

CVS Health Corp has a M-score of -2.79 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.

CVS Health Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.1041.02580.90271.10150.93191.30861.00941.11570.8835
GMI 1.27191.01221.00881.09691.05130.97351.03081.05181.0646
AQI 2.69440.93880.98550.9990.97330.92971.00971.08930.9753
SGI 1.74181.1461.12281.11461.14981.02961.09941.09991.1581
DEPI 0.76721.16240.90870.96020.92570.94650.99511.02350.895
SGAI 0.6960.228700.90650.45532.0530.9570.93690.9361
LVGI 0.72781.01180.96641.03361.07221.1241.04571.29421.0266
TATA -0.0108-0.0121-0.0055-0.0371-0.0371-0.0167-0.0401-0.0343-0.0434
M-score -0.83-2.25-2.31-2.41-2.50-2.52-2.56-2.46-2.63

CVS Health Corp Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.00941.00651.03641.07111.11571.14441.05680.91930.88350.8331
GMI 1.03081.04871.0581.07041.05181.05731.06041.04841.06461.0548
AQI 1.00970.97880.96271.04981.08931.07981.09371.00360.97530.9958
SGI 1.09941.11121.10241.1041.09991.121.14531.15751.15811.1164
DEPI 0.99510.97560.99261.03111.02350.97860.93050.88290.8950.9294
SGAI 0.9570.95130.94540.92990.93690.9420.94730.94910.93610.9536
LVGI 1.04571.06451.07781.28331.29421.29121.31171.06531.02661.041
TATA -0.0401-0.0364-0.0376-0.0347-0.0343-0.0399-0.0437-0.0612-0.0434-0.0582
M-score -2.56-2.54-2.53-2.50-2.46-2.45-2.53-2.70-2.63-2.79
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