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GuruFocus has detected 1 Warning Sign with Lowe's Companies Inc $LOW.
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Lowe's Companies Inc (NYSE:LOW)
Beneish M-Score
-2.27 (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.

Lowe's Companies Inc has a M-score of -2.27 suggests that the company is not a manipulator.

LOW' s Beneish M-Score Range Over the Past 10 Years
Min: -3.63   Max: -1.64
Current: -2.27

-3.63
-1.64

During the past 13 years, the highest Beneish M-Score of Lowe's Companies Inc was -1.64. The lowest was -3.63. And the median was -2.71.


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 Lowe's Companies 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+0.528 * 1.0093+0.404 * 2.062+0.892 * 1.1074+0.115 * 1.0035
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.001+4.679 * -0.0641-0.327 * 1.0584
=-2.27

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Apr17) TTM:Last Year (Apr16) TTM:
Accounts Receivable was $0 Mil.
Revenue was 16860 + 15784 + 15739 + 18260 = $66,643 Mil.
Gross Profit was 5800 + 5432 + 5407 + 6288 = $22,927 Mil.
Total Current Assets was $15,276 Mil.
Total Assets was $37,613 Mil.
Property, Plant and Equipment(Net PPE) was $19,748 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,596 Mil.
Selling, General & Admin. Expense(SGA) was $15,612 Mil.
Total Current Liabilities was $14,686 Mil.
Long-Term Debt was $15,770 Mil.
Net Income was 602 + 663 + 379 + 1167 = $2,811 Mil.
Non Operating Income was -470 + 0 + 0 + 0 = $-470 Mil.
Cash Flow from Operations was 3295 + 348 + 641 + 1408 = $5,692 Mil.
Accounts Receivable was $0 Mil.
Revenue was 15234 + 13236 + 14360 + 17348 = $60,178 Mil.
Gross Profit was 5337 + 4588 + 4990 + 5981 = $20,896 Mil.
Total Current Assets was $16,473 Mil.
Total Assets was $37,177 Mil.
Property, Plant and Equipment(Net PPE) was $19,463 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,579 Mil.
Selling, General & Admin. Expense(SGA) was $14,083 Mil.
Total Current Liabilities was $14,121 Mil.
Long-Term Debt was $14,322 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)
=(0 / 66643) / (0 / 60178)
=0 / 0
=1

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)
=(20896 / 60178) / (22927 / 66643)
=0.34723653 / 0.34402713
=1.0093

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 - (15276 + 19748) / 37613) / (1 - (16473 + 19463) / 37177)
=0.06883258 / 0.03338085
=2.062

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
=66643 / 60178
=1.1074

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))
=(1579 / (1579 + 19463)) / (1596 / (1596 + 19748))
=0.0750404 / 0.07477511
=1.0035

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)
=(15612 / 66643) / (14083 / 60178)
=0.23426316 / 0.2340224
=1.001

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)
=((15770 + 14686) / 37613) / ((14322 + 14121) / 37177)
=0.80972004 / 0.7650698
=1.0584

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
=(2811 - -470 - 5692) / 37613
=-0.0641

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.

Lowe's Companies Inc has a M-score of -2.27 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.

Lowe's Companies Inc Annual Data

Jan08Jan09Jan10Jan11Jan12Jan13Jan14Jan15Jan16Jan17
DSRI 1111111111
GMI 0.99641.01260.98130.99241.01671.00770.99150.99430.99891.0079
AQI 1.5340.82071.07312.0790.92720.95151.13791.18260.62331.9809
SGI 1.02890.99890.9791.03381.02851.00621.05731.05261.05071.1006
DEPI 0.95440.93840.95571.00961.05640.95431.00740.95070.97831.0158
SGAI 1.04791.04991.07260.98941.020.96610.99380.98011.01170.9743
LVGI 1.10340.89450.93231.12551.09761.15211.13061.09671.10931.0873
TATA -0.0498-0.0591-0.0688-0.0543-0.0721-0.0551-0.0556-0.0782-0.0716-0.073
M-score -2.52-2.80-2.80-2.31-2.84-2.80-2.68-2.76-2.96-2.35

Lowe's Companies Inc Quarterly Data

Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17Apr17
DSRI 1111111111
GMI 0.99430.99921.00150.9990.99891.00191.00161.00621.00791.0093
AQI 1.18261.13391.11740.94250.62330.6071.36611.54441.98092.062
SGI 1.05261.05991.05641.05481.05071.05671.05881.07011.10061.1074
DEPI 0.95070.97020.97990.98450.97830.981.02751.01441.01581.0035
SGAI 0.98010.9730.97350.9721.01170.9971.00481.04740.97431.001
LVGI 1.09671.11211.13331.10911.10931.1271.11021.0851.08731.0584
TATA -0.0782-0.085-0.079-0.0649-0.0716-0.0742-0.0668-0.0863-0.073-0.0641
M-score -2.76-2.81-2.79-2.79-2.96-2.98-2.63-2.63-2.35-2.27
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