Switch to:
GuruFocus has detected 4 Warning Signs with Level 3 Communications Inc $LVLT.
More than 500,000 people have already joined GuruFocus to track the stocks they follow and exchange investment ideas.
Level 3 Communications Inc (NYSE:LVLT)
Beneish M-Score
-2.90 (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.

Level 3 Communications Inc has a M-score of -2.90 suggests that the company is not a manipulator.

LVLT' s Beneish M-Score Range Over the Past 10 Years
Min: -5.52   Max: -0.72
Current: -2.9

-5.52
-0.72

During the past 13 years, the highest Beneish M-Score of Level 3 Communications Inc was -0.72. The lowest was -5.52. And the median was -2.63.


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 Level 3 Communications 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 * 0.8885+0.528 * 0.9702+0.404 * 0.9746+0.892 * 0.993+0.115 * 0.9625
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9808+4.679 * -0.0656-0.327 * 0.942
=-2.90

* 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 $712 Mil.
Revenue was 2048 + 2032 + 2033 + 2056 = $8,169 Mil.
Gross Profit was 1021 + 1020 + 1021 + 1041 = $4,103 Mil.
Total Current Assets was $2,807 Mil.
Total Assets was $25,071 Mil.
Property, Plant and Equipment(Net PPE) was $10,285 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,269 Mil.
Selling, General & Admin. Expense(SGA) was $1,415 Mil.
Total Current Liabilities was $1,734 Mil.
Long-Term Debt was $10,581 Mil.
Net Income was 95 + 250 + 143 + 149 = $637 Mil.
Non Operating Income was -40 + -6 + 1 + -45 = $-90 Mil.
Cash Flow from Operations was 539 + 557 + 645 + 631 = $2,372 Mil.
Accounts Receivable was $807 Mil.
Revenue was 2051 + 2053 + 2062 + 2061 = $8,227 Mil.
Gross Profit was 1019 + 1001 + 987 + 1002 = $4,009 Mil.
Total Current Assets was $2,789 Mil.
Total Assets was $25,039 Mil.
Property, Plant and Equipment(Net PPE) was $9,974 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,179 Mil.
Selling, General & Admin. Expense(SGA) was $1,453 Mil.
Total Current Liabilities was $2,187 Mil.
Long-Term Debt was $10,870 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)
=(712 / 8169) / (807 / 8227)
=0.08715877 / 0.09809165
=0.8885

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)
=(4009 / 8227) / (4103 / 8169)
=0.48729792 / 0.50226466
=0.9702

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 - (2807 + 10285) / 25071) / (1 - (2789 + 9974) / 25039)
=0.47780304 / 0.49027517
=0.9746

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
=8169 / 8227
=0.993

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))
=(1179 / (1179 + 9974)) / (1269 / (1269 + 10285))
=0.10571147 / 0.10983209
=0.9625

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)
=(1415 / 8169) / (1453 / 8227)
=0.17321582 / 0.17661359
=0.9808

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)
=((10581 + 1734) / 25071) / ((10870 + 2187) / 25039)
=0.49120498 / 0.52146651
=0.942

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
=(637 - -90 - 2372) / 25071
=-0.0656

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.

Level 3 Communications Inc has a M-score of -2.90 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.

Level 3 Communications Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.18240.95820.94690.85632.03420.74880.9521.02010.84590.9471
GMI 0.830.98490.99210.97220.99071.53090.7741.1550.91960.9599
AQI 2.0231.00711.00741.06671.01830.96771.00641.85661.12670.9407
SGI 1.04811.00750.87470.95451.20661.47150.99011.07351.21430.9931
DEPI 0.8270.95570.94750.98321.56561.07560.94591.16840.71740.9619
SGAI 1.26360.8671.01641.0751.06840.46111.48340.62371.0230.9658
LVGI 0.91790.99521.05981.07720.88081.01820.97940.81030.8310.9702
TATA -0.0949-0.0979-0.1121-0.1104-0.0774-0.0588-0.057-0.03460.0826-0.0648
M-score -2.43-2.96-3.19-3.20-1.61-2.20-3.00-1.98-2.02-2.87

Level 3 Communications Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.02010.9340.87590.95470.84590.95331.03350.91310.94710.8885
GMI 1.1551.03790.92080.91770.91960.93020.94570.95190.95990.9702
AQI 1.85661.8221.88722.02231.12671.09861.09381.08730.94070.9746
SGI 1.07351.13811.19551.25141.21431.13931.07381.01270.99310.993
DEPI 1.16841.01990.91770.82230.71740.80960.87140.9550.96190.9625
SGAI 0.62370.8021.08191.13371.0230.9840.96670.9470.96580.9808
LVGI 0.81030.81470.80180.77950.8310.85830.84640.83810.97020.942
TATA -0.0346-0.0405-0.0434-0.05220.08260.07130.06530.0609-0.0648-0.0656
M-score -1.98-2.16-2.26-2.14-2.02-2.03-2.03-2.20-2.87-2.90
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat

{{numOfNotice}}
FEEDBACK