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GuruFocus has detected 4 Warning Signs with DGSE Companies Inc $DGSE.
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DGSE Companies Inc (AMEX:DGSE)
Beneish M-Score
-3.42 (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.

DGSE Companies Inc has a M-score of -3.42 suggests that the company is not a manipulator.

DGSE' s Beneish M-Score Range Over the Past 10 Years
Min: -10000000   Max: 8.3
Current: -3.42

-10000000
8.3

During the past 13 years, the highest Beneish M-Score of DGSE Companies Inc was 8.30. The lowest was -10000000.00. And the median was -2.46.


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 DGSE Companies 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 * 1.3378+0.528 * 0.9526+0.404 * 0.6995+0.892 * 0.8639+0.115 * 0.5419
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0462+4.679 * -0.2247-0.327 * 0.6185
=-3.42

* 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 $0.19 Mil.
Revenue was 15.124 + 10.482 + 10.572 + 15.498 = $51.68 Mil.
Gross Profit was 2.494 + 2.009 + 1.868 + 2.282 = $8.65 Mil.
Total Current Assets was $10.52 Mil.
Total Assets was $12.21 Mil.
Property, Plant and Equipment(Net PPE) was $1.61 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.39 Mil.
Selling, General & Admin. Expense(SGA) was $9.84 Mil.
Total Current Liabilities was $6.08 Mil.
Long-Term Debt was $0.00 Mil.
Net Income was 0.22 + -1.269 + -1.51 + -0.537 = $-3.10 Mil.
Non Operating Income was -0.005 + 0.001 + 0.003 + 0 = $-0.00 Mil.
Cash Flow from Operations was -0.912 + 0.632 + 0.264 + -0.336 = $-0.35 Mil.
Accounts Receivable was $0.17 Mil.
Revenue was 11.775 + 16.576 + 16.524 + 14.943 = $59.82 Mil.
Gross Profit was 2.149 + 2.437 + 2.387 + 2.569 = $9.54 Mil.
Total Current Assets was $12.09 Mil.
Total Assets was $16.44 Mil.
Property, Plant and Equipment(Net PPE) was $4.20 Mil.
Depreciation, Depletion and Amortization(DDA) was $0.49 Mil.
Selling, General & Admin. Expense(SGA) was $10.89 Mil.
Total Current Liabilities was $10.93 Mil.
Long-Term Debt was $2.31 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)
=(0.193 / 51.676) / (0.167 / 59.818)
=0.00373481 / 0.0027918
=1.3378

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)
=(9.542 / 59.818) / (8.653 / 51.676)
=0.1595172 / 0.16744717
=0.9526

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 - (10.515 + 1.614) / 12.209) / (1 - (12.086 + 4.2) / 16.44)
=0.00655254 / 0.0093674
=0.6995

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
=51.676 / 59.818
=0.8639

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))
=(0.494 / (0.494 + 4.2)) / (0.389 / (0.389 + 1.614))
=0.10524073 / 0.19420869
=0.5419

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)
=(9.84 / 51.676) / (10.887 / 59.818)
=0.19041721 / 0.18200207
=1.0462

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 + 6.083) / 12.209) / ((2.314 + 10.929) / 16.44)
=0.498239 / 0.80553528
=0.6185

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
=(-3.096 - -0.001 - -0.352) / 12.209
=-0.2247

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.

DGSE Companies Inc has a M-score of -3.42 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.

DGSE Companies Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 2.50890.31710.40061.13441.31030.49550.31237.27660.29551.5675
GMI 0.90231.46470.85910.95091.03940.76111.10620.961.12010.9287
AQI 2.83670.49820.98730.026525.861.00611.13890.0561.63580.637
SGI 1.43541.60430.83990.97121.68540.91890.72580.76220.86110.7933
DEPI 2.10620.60881.1720.91961.36090.51021.75470.88780.72420.5689
SGAI 1.21680.52521.51911.13690.66942.0440.88171.04741.02171.1696
LVGI 0.91421.32961.01491.50140.49040.80951.60711.16620.91110.8782
TATA 0.1243-0.2154-0.05160.1491-0.0944-0.0726-0.1941-0.1677-0.1483-0.3401
M-score 0.69-3.61-3.57-2.308.30-3.65-4.241.82-3.63-3.96

DGSE Companies Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 7.27660.06551.11230.87240.295512.20071.19571.55321.56751.3378
GMI 0.960.94421.02981.10841.12011.12591.17381.05570.92870.9526
AQI 0.0560.06811.13941.07441.63581.06310.89681.07510.6370.6995
SGI 0.76220.80310.83560.85080.86110.91250.95860.87130.79330.8639
DEPI 0.88780.51160.79860.91580.72420.87920.81910.36680.56890.5419
SGAI 1.04741.04540.93840.96041.02170.97711.00281.07511.16961.0462
LVGI 1.16621.19440.96581.04590.91111.16391.21091.26160.87820.6185
TATA -0.1677-0.20050.0015-0.0597-0.1483-0.1865-0.1828-0.3238-0.3401-0.2247
M-score 1.82-4.99-2.45-2.94-3.636.90-3.23-3.71-3.96-3.42
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