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GuruFocus has detected 3 Warning Signs with Equifax Inc $EFX.
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Equifax Inc (NYSE:EFX)
Beneish M-Score
-2.52 (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.

Equifax Inc has a M-score of -2.52 suggests that the company is not a manipulator.

EFX' s Beneish M-Score Range Over the Past 10 Years
Min: -3.9   Max: -2.13
Current: -2.52

-3.9
-2.13

During the past 13 years, the highest Beneish M-Score of Equifax Inc was -2.13. The lowest was -3.90. And the median was -2.69.


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 Equifax 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 * 0.913+0.528 * 1.0304+0.404 * 0.9742+0.892 * 1.1856+0.115 * 0.9187
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8942+4.679 * -0.0381-0.327 * 0.8889
=-2.52

* 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 $460 Mil.
Revenue was 832.2 + 801.1 + 804.1 + 811.3 = $3,249 Mil.
Gross Profit was 531.4 + 514.8 + 516.1 + 525.5 = $2,088 Mil.
Total Current Assets was $705 Mil.
Total Assets was $6,789 Mil.
Property, Plant and Equipment(Net PPE) was $479 Mil.
Depreciation, Depletion and Amortization(DDA) was $284 Mil.
Selling, General & Admin. Expense(SGA) was $948 Mil.
Total Current Liabilities was $1,201 Mil.
Long-Term Debt was $2,037 Mil.
Net Income was 153.3 + 123 + 132.8 + 130.9 = $540 Mil.
Non Operating Income was 3.1 + 2.8 + 2.4 + -0.8 = $8 Mil.
Cash Flow from Operations was 103.7 + 271.3 + 245 + 171.4 = $791 Mil.
Accounts Receivable was $425 Mil.
Revenue was 728.3 + 666.3 + 667.4 + 678.1 = $2,740 Mil.
Gross Profit was 475 + 441.3 + 440.9 + 457.3 = $1,815 Mil.
Total Current Assets was $630 Mil.
Total Assets was $6,733 Mil.
Property, Plant and Equipment(Net PPE) was $397 Mil.
Depreciation, Depletion and Amortization(DDA) was $207 Mil.
Selling, General & Admin. Expense(SGA) was $895 Mil.
Total Current Liabilities was $1,729 Mil.
Long-Term Debt was $1,884 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)
=(459.7 / 3248.7) / (424.7 / 2740.1)
=0.14150275 / 0.15499434
=0.913

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)
=(1814.5 / 2740.1) / (2087.8 / 3248.7)
=0.66220211 / 0.64265706
=1.0304

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 - (705.2 + 479) / 6789) / (1 - (630.1 + 397.4) / 6732.9)
=0.82557078 / 0.84739117
=0.9742

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
=3248.7 / 2740.1
=1.1856

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))
=(206.5 / (206.5 + 397.4)) / (284 / (284 + 479))
=0.34194403 / 0.37221494
=0.9187

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)
=(948.3 / 3248.7) / (894.5 / 2740.1)
=0.29190138 / 0.32644794
=0.8942

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)
=((2037.4 + 1201.3) / 6789) / ((1883.8 + 1729.4) / 6732.9)
=0.47705111 / 0.5366484
=0.8889

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
=(540 - 7.5 - 791.4) / 6789
=-0.0381

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.

Equifax Inc has a M-score of -2.52 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.

Equifax Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.01390.81561.13830.94771.06371.0180.87911.02960.94891.0492
GMI 1.00031.00191.01820.98130.94130.99140.96261.00760.97971.0323
AQI 1.12410.99740.98630.99310.99961.03960.971.01930.98141.0444
SGI 1.19181.05040.89691.07111.01811.0951.11141.05751.09331.1807
DEPI 1.0260.93741.05920.92280.99930.98560.92030.98171.14640.966
SGAI 1.00891.02011.03510.99841.08421.09820.95630.9931.07610.9081
LVGI 1.15080.95040.90470.90421.00141.22470.85971.06060.91631.2975
TATA -0.0009-0.0557-0.0537-0.0254-0.0478-0.0511-0.0455-0.0544-0.071-0.0464
M-score -2.30-2.86-2.66-2.57-2.68-2.70-2.69-2.66-2.76-2.54

Equifax Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.02960.99750.97541.00650.94891.06991.01461.06271.04920.913
GMI 1.00760.99480.98390.98250.97970.99561.01421.02311.03231.0304
AQI 1.01930.97370.97550.97240.98141.05071.05031.05081.04440.9742
SGI 1.05751.07831.09321.09691.09331.09441.11891.1481.18071.1856
DEPI 0.98170.99451.03721.07431.14641.1731.12291.0470.9660.9187
SGAI 0.9931.04711.08221.06691.07611.010.96040.93140.90810.8942
LVGI 1.06061.03181.0530.99570.91631.27331.23791.24751.29750.8889
TATA -0.0544-0.0613-0.0617-0.0721-0.071-0.0459-0.0432-0.0379-0.0464-0.0381
M-score -2.66-2.73-2.75-2.75-2.76-2.60-2.59-2.50-2.54-2.52
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