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GuruFocus has detected 2 Warning Signs with Groupon Inc $GRPN.
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Groupon Inc (NAS:GRPN)
Beneish M-Score
-3.14 (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.

Groupon Inc has a M-score of -3.14 suggests that the company is not a manipulator.

GRPN' s Beneish M-Score Range Over the Past 10 Years
Min: -3.54   Max: -2.23
Current: -3.14

-3.54
-2.23

During the past 8 years, the highest Beneish M-Score of Groupon Inc was -2.23. The lowest was -3.54. And the median was -2.99.


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 Groupon 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 * 0.8625+0.528 * 1.029+0.404 * 0.9951+0.892 * 1.0057+0.115 * 0.8864
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9409+4.679 * -0.1079-0.327 * 1.1482
=-3.14

* 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 $64 Mil.
Revenue was 673.626 + 934.885 + 720.468 + 756.03 = $3,085 Mil.
Gross Profit was 309.451 + 369.87 + 314.117 + 333.588 = $1,327 Mil.
Total Current Assets was $843 Mil.
Total Assets was $1,484 Mil.
Property, Plant and Equipment(Net PPE) was $158 Mil.
Depreciation, Depletion and Amortization(DDA) was $137 Mil.
Selling, General & Admin. Expense(SGA) was $1,377 Mil.
Total Current Liabilities was $992 Mil.
Long-Term Debt was $195 Mil.
Net Income was -24.414 + -52.588 + -37.976 + -54.904 = $-170 Mil.
Non Operating Income was 0.115 + -58.483 + -1.843 + -6.09 = $-66 Mil.
Cash Flow from Operations was -137.331 + 288.662 + -40.822 + -54.01 = $56 Mil.
Accounts Receivable was $73 Mil.
Revenue was 698.435 + 917.17 + 713.595 + 738.395 = $3,068 Mil.
Gross Profit was 320.102 + 371.74 + 328.912 + 337.007 = $1,358 Mil.
Total Current Assets was $897 Mil.
Total Assets was $1,619 Mil.
Property, Plant and Equipment(Net PPE) was $193 Mil.
Depreciation, Depletion and Amortization(DDA) was $135 Mil.
Selling, General & Admin. Expense(SGA) was $1,455 Mil.
Total Current Liabilities was $1,103 Mil.
Long-Term Debt was $26 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)
=(63.732 / 3085.009) / (73.471 / 3067.595)
=0.02065861 / 0.02395068
=0.8625

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)
=(1357.761 / 3067.595) / (1327.026 / 3085.009)
=0.44261417 / 0.43015304
=1.029

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 - (843.219 + 158.222) / 1483.835) / (1 - (896.814 + 193.036) / 1618.68)
=0.32509949 / 0.32670448
=0.9951

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
=3085.009 / 3067.595
=1.0057

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))
=(135.185 / (135.185 + 193.036)) / (137.32 / (137.32 + 158.222))
=0.41187188 / 0.46463785
=0.8864

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)
=(1376.754 / 3085.009) / (1455.02 / 3067.595)
=0.44627228 / 0.47431946
=0.9409

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)
=((195.412 + 992.029) / 1483.835) / ((25.502 + 1102.701) / 1618.68)
=0.80025138 / 0.69698952
=1.1482

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
=(-169.882 - -66.301 - 56.499) / 1483.835
=-0.1079

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.

Groupon Inc has a M-score of -3.14 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.

Groupon Inc Annual Data

Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.61350.78480.9160.73381.275
GMI 1.21271.18621.21121.08481.0322
AQI 0.92440.81231.77060.97140.9735
SGI 1.44961.10251.1821.02540.9969
DEPI 1.21170.78961.01080.98650.8984
SGAI 0.65790.85320.85080.98420.9764
LVGI 1.02561.01611.01161.16241.1663
TATA -0.1577-0.1066-0.1544-0.1197-0.141
M-score -3.02-3.07-2.67-3.28-2.95

Groupon Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.9160.6470.64660.57960.73380.79650.72390.97071.2750.8625
GMI 1.21121.16661.13931.11011.08481.06711.04651.04091.03221.029
AQI 1.77060.4980.68520.85340.97142.16041.35251.21130.97350.9951
SGI 1.1821.13461.0991.05411.02541.00120.99971.00210.99691.0057
DEPI 1.01080.90930.88631.00140.98651.00380.97380.90460.89840.8864
SGAI 0.85080.86190.87450.92910.98421.03351.06561.00550.97640.9409
LVGI 1.01161.04510.93981.13631.16241.17221.30491.13131.16631.1482
TATA -0.1544-0.1587-0.1274-0.1005-0.1197-0.1091-0.1468-0.1607-0.141-0.1079
M-score -2.67-3.54-3.34-3.32-3.28-2.73-3.37-3.20-2.95-3.14
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