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GuruFocus has detected 3 Warning Signs with JPMorgan Chase & Co $JPM.
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JPMorgan Chase & Co (NYSE:JPM)
Beneish M-Score
-2.43 (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.

JPMorgan Chase & Co has a M-score of -2.43 suggests that the company is not a manipulator.

JPM' s Beneish M-Score Range Over the Past 10 Years
Min: -2.97   Max: 4.35
Current: -2.43

-2.97
4.35

During the past 13 years, the highest Beneish M-Score of JPMorgan Chase & Co was 4.35. The lowest was -2.97. And the median was -2.40.


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 JPMorgan Chase & Co 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 * 0.9944+0.528 * 1+0.404 * 1.0003+0.892 * 1.0473+0.115 * 0.9225
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0038+4.679 * 0.0016-0.327 * 0.9623
=-2.43

* 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 $60,038 Mil.
Revenue was 24675 + 23376 + 24673 + 24380 = $97,104 Mil.
Gross Profit was 24675 + 23376 + 24673 + 24380 = $97,104 Mil.
Total Current Assets was $0 Mil.
Total Assets was $2,546,290 Mil.
Property, Plant and Equipment(Net PPE) was $14,227 Mil.
Depreciation, Depletion and Amortization(DDA) was $5,653 Mil.
Selling, General & Admin. Expense(SGA) was $40,483 Mil.
Total Current Liabilities was $0 Mil.
Long-Term Debt was $313,834 Mil.
Net Income was 6448 + 6727 + 6286 + 6200 = $25,661 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was -20036 + 38911 + 4192 + -1524 = $21,543 Mil.
Accounts Receivable was $57,649 Mil.
Revenue was 23239 + 22885 + 22780 + 23812 = $92,716 Mil.
Gross Profit was 23239 + 22885 + 22780 + 23812 = $92,716 Mil.
Total Current Assets was $0 Mil.
Total Assets was $2,423,808 Mil.
Property, Plant and Equipment(Net PPE) was $14,195 Mil.
Depreciation, Depletion and Amortization(DDA) was $5,048 Mil.
Selling, General & Admin. Expense(SGA) was $38,507 Mil.
Total Current Liabilities was $0 Mil.
Long-Term Debt was $310,457 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)
=(60038 / 97104) / (57649 / 92716)
=0.61828555 / 0.62178049
=0.9944

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)
=(92716 / 92716) / (97104 / 97104)
=1 / 1
=1

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 - (0 + 14227) / 2546290) / (1 - (0 + 14195) / 2423808)
=0.99441266 / 0.99414351
=1.0003

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
=97104 / 92716
=1.0473

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))
=(5048 / (5048 + 14195)) / (5653 / (5653 + 14227))
=0.26232916 / 0.28435614
=0.9225

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)
=(40483 / 97104) / (38507 / 92716)
=0.41690353 / 0.41532206
=1.0038

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)
=((313834 + 0) / 2546290) / ((310457 + 0) / 2423808)
=0.12325148 / 0.12808647
=0.9623

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
=(25661 - 0 - 21543) / 2546290
=0.0016

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.

JPMorgan Chase & Co has a M-score of -2.43 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.

JPMorgan Chase & Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.93222.60740.74031.01740.92560.99321.06571.1010.67621.0979
GMI 1111111111
AQI 1.00051.00140.99910.99921.0001111.00030.99981.0004
SGI 1.16330.94231.49341.02250.94680.99791.00350.97680.98351.0227
DEPI 0.99910.95381.08271.0391.01641.01880.99621.09810.93480.9161
SGAI 0.90751.20040.79691.03451.11231.03611.00561.01791.02041.0049
LVGI 1.20430.85321.27360.90870.8540.951.04820.97311.1050.9691
TATA 0.0806-0.008-0.05470.01-0.034-0.0016-0.0373-0.0058-0.02080.0018
M-score -2.07-1.08-2.58-2.37-2.72-2.48-2.61-2.42-2.94-2.36

JPMorgan Chase & Co Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.1010.95240.90170.79080.67620.85230.95021.091.09790.9944
GMI 1111111111
AQI 1.00031.00020.99990.99990.99980.99991.00041.00051.00041.0003
SGI 0.97681.00531.00180.97020.98350.96620.98091.01891.02271.0473
DEPI 1.09811.1271.08120.97140.93480.91590.9040.91250.91610.9225
SGAI 1.01791.00961.02391.03091.02041.02711.01521.00281.00491.0038
LVGI 0.97310.97111.06981.11331.1051.06610.989610.96910.9623
TATA -0.0058-0.0056-0.0146-0.0257-0.0208-0.00540.00230.01030.00180.0016
M-score -2.42-2.52-2.65-2.86-2.94-2.71-2.54-2.34-2.36-2.43
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