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GuruFocus has detected 3 Warning Signs with Waters Corp $FRA:WAZ.
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Waters Corp (FRA:WAZ)
Beneish M-Score
-2.58 (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.

Waters Corp has a M-score of -2.54 suggests that the company is not a manipulator.

FRA:WAZ' s Beneish M-Score Range Over the Past 10 Years
Min: -3.1   Max: 9.93
Current: -2.58

-3.1
9.93

During the past 13 years, the highest Beneish M-Score of Waters Corp was 9.93. The lowest was -3.10. And the median was -2.58.


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 Waters Corp 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 * 1.0086+0.528 * 0.9935+0.404 * 0.879+0.892 * 1.0845+0.115 * 0.97
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9556+4.679 * -0.0222-0.327 * 0.9754
=-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 €432 Mil.
Revenue was 465.60916316 + 596.063133946 + 469.419941192 + 477.536489854 = €2,009 Mil.
Gross Profit was 268.231884058 + 357.577021519 + 274.869464493 + 281.3999644 = €1,182 Mil.
Total Current Assets was €3,533 Mil.
Total Assets was €4,498 Mil.
Property, Plant and Equipment(Net PPE) was €313 Mil.
Depreciation, Depletion and Amortization(DDA) was €88 Mil.
Selling, General & Admin. Expense(SGA) was €471 Mil.
Total Current Liabilities was €591 Mil.
Long-Term Debt was €1,535 Mil.
Net Income was 98.6975222066 + 165.30287231 + 111.250111378 + 114.112673549 = €489 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = €0 Mil.
Cash Flow from Operations was 162.888265545 + 163.970992511 + 124.029225697 + 138.305446778 = €589 Mil.
Accounts Receivable was €395 Mil.
Revenue was 426.765445402 + 538.520150555 + 446.028691081 + 440.826873385 = €1,852 Mil.
Gross Profit was 246.134159483 + 320.109244469 + 261.760670053 + 254.863227301 = €1,083 Mil.
Total Current Assets was €2,973 Mil.
Total Assets was €3,923 Mil.
Property, Plant and Equipment(Net PPE) was €302 Mil.
Depreciation, Depletion and Amortization(DDA) was €82 Mil.
Selling, General & Admin. Expense(SGA) was €455 Mil.
Total Current Liabilities was €471 Mil.
Long-Term Debt was €1,431 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)
=(431.748480598 / 2008.62872815) / (394.735991379 / 1852.14116042)
=0.21494688 / 0.21312414
=1.0086

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)
=(1082.86730131 / 1852.14116042) / (1182.07833447 / 2008.62872815)
=0.584657 / 0.58850016
=0.9935

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 - (3532.88826554 + 312.652641421) / 4498.08602151) / (1 - (2972.89780891 + 302.440732759) / 3922.76849856)
=0.14507173 / 0.16504414
=0.879

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
=2008.62872815 / 1852.14116042
=1.0845

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))
=(81.7532028385 / (81.7532028385 + 302.440732759)) / (87.8654071603 / (87.8654071603 + 312.652641421))
=0.2127915 / 0.21937939
=0.97

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)
=(471.192287196 / 2008.62872815) / (454.651969174 / 1852.14116042)
=0.23458406 / 0.24547371
=0.9556

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)
=((1535.38943432 + 591.127629734) / 4498.08602151) / ((1430.7659842 + 470.572916667) / 3922.76849856)
=0.47276043 / 0.48469312
=0.9754

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
=(489.363179445 - 0 - 589.193930531) / 4498.08602151
=-0.0222

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.

Waters Corp 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.

Waters Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.00310.98121.00761.05970.96891.0411.01761.04951.00541.0138
GMI 1.01740.98390.96231.00160.99511.00921.01931.00450.99740.9976
AQI 0.88691.18760.90150.82180.88411.00670.97350.97030.89010.8747
SGI 1.05641.00790.9911.18551.06321.06151.00291.06511.21591.0643
DEPI 0.94141.00851.16830.96481.08461.03341.01020.9311.02870.9793
SGAI 0.98180.99871.02670.96180.97480.98021.0010.98960.94590.9734
LVGI 0.83990.78990.96380.99491.02481.02290.95751.0021.02710.9891
TATA -0.0585-0.0537-0.0507-0.0334-0.02270.0038-0.0096-0.019-0.0213-0.0218
M-score -2.69-2.60-2.75-2.48-2.60-2.36-2.49-2.48-2.42-2.56

Waters Corp Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.04951.08041.01010.99491.00540.9570.9990.9911.01381.0086
GMI 1.00450.98450.9860.99120.99741.01061.00391.00320.99760.9935
AQI 0.97030.89980.89770.8760.89010.940.92510.91440.87470.879
SGI 1.06511.16211.21241.2221.21591.1321.09661.07081.06431.0845
DEPI 0.9310.95960.90440.99731.02870.99051.00660.95210.97930.97
SGAI 0.98960.95150.92960.94590.94590.98060.9960.98070.97340.9556
LVGI 1.0021.03421.01861.01851.02711.01551.01010.98430.98910.9754
TATA -0.019-0.0226-0.0223-0.0243-0.0213-0.0229-0.0271-0.0245-0.0218-0.0222
M-score -2.48-2.42-2.44-2.45-2.42-2.53-2.55-2.57-2.56-2.54
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