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GuruFocus has detected 2 Warning Signs with Genpact Ltd $G.
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Genpact Ltd (NYSE:G)
Beneish M-Score
-2.72 (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.

Genpact Ltd has a M-score of -2.72 suggests that the company is not a manipulator.

G' s Beneish M-Score Range Over the Past 10 Years
Min: -2.93   Max: -1.88
Current: -2.72

-2.93
-1.88

During the past 13 years, the highest Beneish M-Score of Genpact Ltd was -1.88. The lowest was -2.93. And the median was -2.55.


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 Genpact 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 * 0.9568+0.528 * 0.9953+0.404 * 1.0111+0.892 * 1.0404+0.115 * 1.1009
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0142+4.679 * -0.0413-0.327 * 1.1574
=-2.72

* 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 $603 Mil.
Revenue was 622.995 + 681.747 + 648.783 + 630.523 = $2,584 Mil.
Gross Profit was 239.658 + 276.075 + 256.351 + 246.768 = $1,019 Mil.
Total Current Assets was $1,219 Mil.
Total Assets was $2,912 Mil.
Property, Plant and Equipment(Net PPE) was $213 Mil.
Depreciation, Depletion and Amortization(DDA) was $84 Mil.
Selling, General & Admin. Expense(SGA) was $644 Mil.
Total Current Liabilities was $523 Mil.
Long-Term Debt was $1,039 Mil.
Net Income was 53.338 + 77.109 + 68.779 + 65.231 = $264 Mil.
Non Operating Income was -8.918 + 1.06 + 3.02 + 3.237 = $-2 Mil.
Cash Flow from Operations was 31.028 + 122.852 + 143.732 + 88.811 = $386 Mil.
Accounts Receivable was $606 Mil.
Revenue was 609.703 + 646.528 + 617.831 + 609.532 = $2,484 Mil.
Gross Profit was 236.855 + 252.591 + 242.001 + 243.228 = $975 Mil.
Total Current Assets was $1,234 Mil.
Total Assets was $2,844 Mil.
Property, Plant and Equipment(Net PPE) was $180 Mil.
Depreciation, Depletion and Amortization(DDA) was $81 Mil.
Selling, General & Admin. Expense(SGA) was $611 Mil.
Total Current Liabilities was $590 Mil.
Long-Term Debt was $728 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)
=(602.871 / 2584.048) / (605.598 / 2483.594)
=0.23330488 / 0.24383937
=0.9568

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)
=(974.675 / 2483.594) / (1018.852 / 2584.048)
=0.39244538 / 0.39428525
=0.9953

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 - (1218.692 + 212.562) / 2911.73) / (1 - (1233.928 + 179.699) / 2843.564)
=0.50845236 / 0.50286788
=1.0111

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
=2584.048 / 2483.594
=1.0404

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))
=(81.241 / (81.241 + 179.699)) / (83.817 / (83.817 + 212.562))
=0.31133977 / 0.28280344
=1.1009

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)
=(644.42 / 2584.048) / (610.708 / 2483.594)
=0.24938391 / 0.24589687
=1.0142

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)
=((1038.542 + 523.322) / 2911.73) / ((727.538 + 590.369) / 2843.564)
=0.53640413 / 0.46347014
=1.1574

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
=(264.457 - -1.601 - 386.423) / 2911.73
=-0.0413

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.

Genpact Ltd has a M-score of -2.72 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.

Genpact Ltd Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.01640.94070.55231.14021.16431.47120.9970.97351.03960.9981
GMI 1.10150.92191.0141.06911.00420.9511.02680.96371.00590.9947
AQI 0.79840.91250.88930.98521.28220.95140.94111.08981.01380.9923
SGI 1.3421.26521.07611.1241.27121.18841.12091.06921.07971.0446
DEPI 1.10970.88561.16711.08370.90191.06790.92670.98310.97141.1058
SGAI 1.08270.86970.96890.91251.00961.07840.94911.1330.96161.029
LVGI 0.59711.37220.8220.70771.78541.4740.92021.11761.02791.0391
TATA -0.055-0.0527-0.0149-0.0129-0.0507-0.0565-0.0366-0.0236-0.0309-0.0281
M-score -2.31-2.73-2.85-2.15-2.48-2.35-2.53-2.60-2.51-2.58

Genpact Ltd Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.97350.95170.95360.95281.03961.07661.02971.05710.99810.9568
GMI 0.96370.9640.97180.98371.00591.01031.01811.01210.99470.9953
AQI 1.08981.11030.98231.00571.01380.99571.01871.01940.99231.0111
SGI 1.06921.08441.09311.08031.07971.06211.04961.04951.04461.0404
DEPI 0.98310.95810.90540.90250.97141.03141.08581.12781.10581.1009
SGAI 1.1331.14481.09291.01820.96160.95350.981.01331.0291.0142
LVGI 1.11761.11130.96230.98841.02791.04330.98411.0181.03911.1574
TATA -0.0236-0.0275-0.0258-0.0392-0.0309-0.016-0.0172-0.0187-0.028-0.0413
M-score -2.60-2.62-2.60-2.65-2.51-2.43-2.45-2.45-2.58-2.72
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