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GuruFocus has detected 6 Warning Signs with Flex Ltd $FLEX.
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Flex Ltd (NAS:FLEX)
Beneish M-Score
-2.69 (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.

Flex Ltd has a M-score of -2.69 suggests that the company is not a manipulator.

FLEX' s Beneish M-Score Range Over the Past 10 Years
Min: -6.24   Max: 0.02
Current: -2.69

-6.24
0.02

During the past 13 years, the highest Beneish M-Score of Flex Ltd was 0.02. The lowest was -6.24. And the median was -2.53.


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 Flex Ltd 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 * 1.0973+0.528 * 1.0332+0.404 * 1.0249+0.892 * 0.9772+0.115 * 0.8922
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0045+4.679 * -0.0634-0.327 * 0.9955
=-2.69

* 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 $2,193 Mil.
Revenue was 5862.597 + 6114.999 + 6008.525 + 5876.813 = $23,863 Mil.
Gross Profit was 384.804 + 416.455 + 313.691 + 405.995 = $1,521 Mil.
Total Current Assets was $8,388 Mil.
Total Assets was $12,593 Mil.
Property, Plant and Equipment(Net PPE) was $2,317 Mil.
Depreciation, Depletion and Amortization(DDA) was $610 Mil.
Selling, General & Admin. Expense(SGA) was $937 Mil.
Total Current Liabilities was $6,505 Mil.
Long-Term Debt was $2,891 Mil.
Net Income was 86.874 + 129.469 + -2.508 + 105.729 = $320 Mil.
Non Operating Income was -16.823 + -3.09 + -8.388 + -3.529 = $-32 Mil.
Cash Flow from Operations was 136.721 + 469.636 + 279.62 + 263.932 = $1,150 Mil.
Accounts Receivable was $2,045 Mil.
Revenue was 5772.698 + 6763.177 + 6316.762 + 5566.248 = $24,419 Mil.
Gross Profit was 406.337 + 452.467 + 396.916 + 352.341 = $1,608 Mil.
Total Current Assets was $8,315 Mil.
Total Assets was $12,385 Mil.
Property, Plant and Equipment(Net PPE) was $2,258 Mil.
Depreciation, Depletion and Amortization(DDA) was $515 Mil.
Selling, General & Admin. Expense(SGA) was $955 Mil.
Total Current Liabilities was $6,572 Mil.
Long-Term Debt was $2,709 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)
=(2192.704 / 23862.934) / (2044.757 / 24418.885)
=0.09188744 / 0.08373671
=1.0973

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)
=(1608.061 / 24418.885) / (1520.945 / 23862.934)
=0.06585317 / 0.06373671
=1.0332

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 - (8387.776 + 2317.026) / 12593.363) / (1 - (8315.126 + 2257.633) / 12384.981)
=0.14996479 / 0.14632416
=1.0249

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
=23862.934 / 24418.885
=0.9772

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))
=(515.367 / (515.367 + 2257.633)) / (609.66 / (609.66 + 2317.026))
=0.18585179 / 0.2083107
=0.8922

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)
=(937.339 / 23862.934) / (954.89 / 24418.885)
=0.03928012 / 0.03910457
=1.0045

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)
=((2890.609 + 6504.627) / 12593.363) / ((2709.389 + 6572.205) / 12384.981)
=0.74604663 / 0.74942335
=0.9955

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
=(319.564 - -31.83 - 1149.909) / 12593.363
=-0.0634

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.

Flex Ltd has a M-score of -2.69 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.

Flex Ltd Annual Data

Mar08Mar09Mar10Mar11Mar12Mar13Mar14Mar15Mar16Mar17
DSRI 1.38450.5811.35120.9140.95611.01371.15320.86510.93671.0973
GMI 1.15431.03180.81930.90711.07611.04550.8970.93340.89751.0332
AQI 0.89740.26810.54170.75021.0181.59061.06471.08422.07981.0249
SGI 1.46171.1230.77911.17971.03170.80321.10771.00150.93390.9772
DEPI 0.77690.97890.91511.38680.89870.97211.22460.82191.10470.8922
SGAI 1.00841.08031.00580.8861.06091.14230.98070.96391.21081.0045
LVGI 1.14011.46190.96970.99060.98530.9661.05340.96840.99450.9955
TATA -0.0621-0.6506-0.0733-0.009-0.0304-0.0747-0.0621-0.0212-0.052-0.0634
M-score -2.04-6.25-2.98-2.52-2.60-2.75-2.55-2.71-2.48-2.69

Flex Ltd Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.88040.86510.7941.09791.15480.93670.97620.93580.86571.0973
GMI 0.90890.93340.92570.90720.88370.89750.90040.95640.99031.0332
AQI 1.20151.08421.06151.61972.03762.07981.97631.28121.02741.0249
SGI 1.09081.00150.92990.91810.91370.93390.98640.98240.96650.9772
DEPI 0.84690.82190.86660.9871.05661.10471.04830.89070.91450.8922
SGAI 0.87080.96391.05551.10241.15121.21081.18241.20261.17761.0045
LVGI 0.97470.96840.97820.99640.99050.99450.98770.98760.99680.9955
TATA -0.0138-0.0158-0.0565-0.05-0.0392-0.052-0.0438-0.0511-0.0702-0.0634
M-score -2.53-2.68-3.03-2.51-2.26-2.48-2.40-2.75-3.00-2.69
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