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GuruFocus has detected 2 Warning Signs with Dean Foods Co $DF.
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Dean Foods Co (NYSE:DF)
Beneish M-Score
-2.54 (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.

Dean Foods Co has a M-score of -2.54 suggests that the company is not a manipulator.

DF' s Beneish M-Score Range Over the Past 10 Years
Min: -4.43   Max: 0.82
Current: -2.54

-4.43
0.82

During the past 13 years, the highest Beneish M-Score of Dean Foods Co was 0.82. The lowest was -4.43. And the median was -2.61.


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 Dean Foods Co 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 * 1.1065+0.528 * 1.0122+0.404 * 1.4316+0.892 * 0.9846+0.115 * 1.0194
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0151+4.679 * -0.0687-0.327 * 1.0191
=-2.54

* 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 $652 Mil.
Revenue was 1995.686 + 2018.009 + 1964.601 + 1848.788 = $7,827 Mil.
Gross Profit was 462.125 + 501.42 + 488.775 + 493.253 = $1,946 Mil.
Total Current Assets was $1,011 Mil.
Total Assets was $2,526 Mil.
Property, Plant and Equipment(Net PPE) was $1,136 Mil.
Depreciation, Depletion and Amortization(DDA) was $177 Mil.
Selling, General & Admin. Expense(SGA) was $1,721 Mil.
Total Current Liabilities was $826 Mil.
Long-Term Debt was $750 Mil.
Net Income was -9.759 + 32.831 + 14.526 + 33.371 = $71 Mil.
Non Operating Income was 0.956 + 1.393 + 1.178 + 2.21 = $6 Mil.
Cash Flow from Operations was 27.556 + 72.795 + 59.299 + 79.089 = $239 Mil.
Accounts Receivable was $598 Mil.
Revenue was 1878.828 + 2022.5 + 2033.693 + 2014.706 = $7,950 Mil.
Gross Profit was 504.068 + 508.471 + 491.988 + 495.641 = $2,000 Mil.
Total Current Assets was $1,046 Mil.
Total Assets was $2,452 Mil.
Property, Plant and Equipment(Net PPE) was $1,149 Mil.
Depreciation, Depletion and Amortization(DDA) was $183 Mil.
Selling, General & Admin. Expense(SGA) was $1,722 Mil.
Total Current Liabilities was $668 Mil.
Long-Term Debt was $834 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)
=(651.795 / 7827.084) / (598.264 / 7949.727)
=0.08327431 / 0.07525592
=1.1065

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)
=(2000.168 / 7949.727) / (1945.573 / 7827.084)
=0.2516021 / 0.24856933
=1.0122

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 - (1011.373 + 1135.724) / 2525.74) / (1 - (1046.289 + 1149.254) / 2452.354)
=0.14991369 / 0.1047202
=1.4316

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
=7827.084 / 7949.727
=0.9846

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))
=(182.664 / (182.664 + 1149.254)) / (176.538 / (176.538 + 1135.724))
=0.13714358 / 0.13452954
=1.0194

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)
=(1721.071 / 7827.084) / (1722.019 / 7949.727)
=0.21988661 / 0.2166136
=1.0151

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)
=((750.195 + 825.953) / 2525.74) / ((833.704 + 668.005) / 2452.354)
=0.62403414 / 0.61235409
=1.0191

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
=(70.969 - 5.737 - 238.739) / 2525.74
=-0.0687

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.

Dean Foods Co has a M-score of -2.54 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.

Dean Foods Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.99530.87171.14731.0070.93781.03381.04031.06820.95261.0751
GMI 1.17140.97920.84681.12611.07280.91361.17191.2260.72440.9431
AQI 0.9891.00820.98620.96690.66050.84740.54840.96910.70761.3822
SGI 1.17071.05350.89591.08741.07590.8780.83780.98960.85460.9493
DEPI 0.98950.98861.07130.93350.97040.97330.97811.01770.93870.9851
SGAI 0.88891.02141.18890.9510.94221.09250.88250.91051.23121.0319
LVGI 1.41330.90550.87480.96331.31140.88370.77071.03181.02450.9658
TATA -0.0303-0.0757-0.054-0.0557-0.3522-0.04970.2772-0.0626-0.1495-0.055
M-score -2.51-2.89-2.76-2.59-4.31-2.88-1.29-2.61-3.67-2.59

Dean Foods Co Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.06820.84060.80330.95260.95261.04681.11341.06721.07511.1065
GMI 1.2261.03970.88910.79460.72440.74880.80810.86850.94311.0122
AQI 0.96910.85630.83180.81910.70760.83781.33591.35281.38221.4316
SGI 0.98961.01630.95690.90330.85460.86290.88110.90820.94930.9846
DEPI 1.01770.8910.9510.92520.93870.90080.96870.98540.98511.0194
SGAI 0.91050.99771.08031.16081.23121.20381.161.10851.03191.0151
LVGI 1.03180.99990.99851.01131.02450.98280.98450.96020.96581.0191
TATA -0.0626-0.1271-0.1652-0.1627-0.1495-0.0802-0.0617-0.0668-0.055-0.0687
M-score -2.61-3.26-3.62-3.59-3.67-3.17-2.76-2.75-2.59-2.54
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