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GuruFocus has detected 4 Warning Signs with FormFactor Inc $FORM.
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FormFactor Inc (NAS:FORM)
Beneish M-Score
-1.45 (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.

FormFactor Inc has a M-score of -1.45 signals that the company is a manipulator.

FORM' s Beneish M-Score Range Over the Past 10 Years
Min: -4.52   Max: 10.98
Current: -1.45

-4.52
10.98

During the past 13 years, the highest Beneish M-Score of FormFactor Inc was 10.98. The lowest was -4.52. And the median was -2.43.


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 FormFactor 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 * 1.2835+0.528 * 0.8967+0.404 * 2.8834+0.892 * 1.7315+0.115 * 0.9139
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.058+4.679 * -0.0347-0.327 * 2.252
=-1.45

* 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 $79.4 Mil.
Revenue was 128.829 + 123.888 + 123.299 + 83.083 = $459.1 Mil.
Gross Profit was 47.571 + 40.275 + 27.188 + 25.427 = $140.5 Mil.
Total Current Assets was $274.2 Mil.
Total Assets was $632.7 Mil.
Property, Plant and Equipment(Net PPE) was $45.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $53.1 Mil.
Selling, General & Admin. Expense(SGA) was $83.8 Mil.
Total Current Liabilities was $90.8 Mil.
Long-Term Debt was $116.9 Mil.
Net Income was 5.185 + -15.444 + -14.198 + 36.884 = $12.4 Mil.
Non Operating Income was -1.574 + -0.946 + -1.042 + -0.302 = $-3.9 Mil.
Cash Flow from Operations was 17.803 + 14.935 + 6.078 + -0.558 = $38.3 Mil.
Accounts Receivable was $35.7 Mil.
Revenue was 53.611 + 71.782 + 65.862 + 73.885 = $265.1 Mil.
Gross Profit was 9.792 + 21.19 + 18.455 + 23.303 = $72.7 Mil.
Total Current Assets was $258.3 Mil.
Total Assets was $340.5 Mil.
Property, Plant and Equipment(Net PPE) was $23.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $23.1 Mil.
Selling, General & Admin. Expense(SGA) was $45.7 Mil.
Total Current Liabilities was $49.6 Mil.
Long-Term Debt was $0.0 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)
=(79.439 / 459.099) / (35.743 / 265.14)
=0.1730324 / 0.13480803
=1.2835

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)
=(72.74 / 265.14) / (140.461 / 459.099)
=0.27434563 / 0.30594926
=0.8967

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 - (274.201 + 45.153) / 632.667) / (1 - (258.336 + 23.707) / 340.528)
=0.49522577 / 0.17174799
=2.8834

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
=459.099 / 265.14
=1.7315

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))
=(23.126 / (23.126 + 23.707)) / (53.07 / (53.07 + 45.153))
=0.49379711 / 0.54030115
=0.9139

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)
=(83.758 / 459.099) / (45.722 / 265.14)
=0.18243995 / 0.17244475
=1.058

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)
=((116.872 + 90.849) / 632.667) / ((0 + 49.647) / 340.528)
=0.32832596 / 0.14579418
=2.252

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
=(12.427 - -3.864 - 38.258) / 632.667
=-0.0347

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.

FormFactor Inc has a M-score of -1.45 signals that the company is likely to 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.

FormFactor Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.01721.081.33850.69780.49312.16610.8051.28960.77351.4065
GMI 0.95363.047528.5089-0.502-0.09740.87240.77690.63330.94971.1352
AQI 2.2761.42520.48021.5111.07129.80090.98210.78520.82072.9263
SGI 1.25180.45480.64391.39330.8981.05441.29681.15981.05151.3596
DEPI 1.11890.77120.87930.58291.82420.87070.60040.82821.09110.9542
SGAI 1.03352.2621.27940.6150.77390.99970.83350.83250.83451.1981
LVGI 0.86520.89821.15791.00110.76421.53660.96651.25420.91462.6449
TATA -0.0174-0.0724-0.1562-0.2567-0.0985-0.0272-0.1541-0.1075-0.1173-0.0345
M-score -1.78-2.1910.98-4.18-3.841.81-3.25-2.93-3.22-1.67

FormFactor Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.28960.91820.86570.66950.77350.93062.06991.79561.40651.2835
GMI 0.63330.6250.65260.81480.94971.13061.15251.20381.13520.8967
AQI 0.78520.77720.78070.82010.82070.82642.72132.85922.92632.8834
SGI 1.15981.20661.21061.14681.05150.93560.94621.17711.35961.7315
DEPI 0.82820.93740.98831.07091.09111.07271.53361.04910.95420.9139
SGAI 0.83250.83140.80390.8050.83450.9581.0391.08941.19811.058
LVGI 1.25421.01121.04990.94860.91461.26712.77352.67832.64492.252
TATA -0.1075-0.1152-0.1215-0.1364-0.1173-0.12490.01260.0009-0.0345-0.0347
M-score -2.93-3.18-3.24-3.40-3.22-3.26-1.23-1.29-1.67-1.45
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