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GuruFocus has detected 5 Warning Signs with Medtronic PLC $MDT.
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Medtronic PLC (NYSE:MDT)
Beneish M-Score
-2.65 (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.

Medtronic PLC has a M-score of -2.65 suggests that the company is not a manipulator.

MDT' s Beneish M-Score Range Over the Past 10 Years
Min: -2.93   Max: -0.27
Current: -2.65

-2.93
-0.27

During the past 13 years, the highest Beneish M-Score of Medtronic PLC was -0.27. The lowest was -2.93. And the median was -2.47.


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 Medtronic PLC 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 * 0.9755+0.528 * 0.9937+0.404 * 0.989+0.892 * 1.0304+0.115 * 0.9184
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9953+4.679 * -0.0286-0.327 * 1.0726
=-2.65

* 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 $5,591 Mil.
Revenue was 7916 + 7283 + 7345 + 7166 = $29,710 Mil.
Gross Profit was 5480 + 5015 + 5019 + 4905 = $20,419 Mil.
Total Current Assets was $24,873 Mil.
Total Assets was $99,816 Mil.
Property, Plant and Equipment(Net PPE) was $4,361 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,917 Mil.
Selling, General & Admin. Expense(SGA) was $9,711 Mil.
Total Current Liabilities was $14,220 Mil.
Long-Term Debt was $25,921 Mil.
Net Income was 1163 + 821 + 1115 + 929 = $4,028 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 1773 + 2085 + 1472 + 1550 = $6,880 Mil.
Accounts Receivable was $5,562 Mil.
Revenue was 7567 + 6934 + 7058 + 7274 = $28,833 Mil.
Gross Profit was 5204 + 4793 + 4876 + 4818 = $19,691 Mil.
Total Current Assets was $23,600 Mil.
Total Assets was $99,782 Mil.
Property, Plant and Equipment(Net PPE) was $4,841 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,820 Mil.
Selling, General & Admin. Expense(SGA) was $9,469 Mil.
Total Current Liabilities was $7,165 Mil.
Long-Term Debt was $30,247 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)
=(5591 / 29710) / (5562 / 28833)
=0.1881858 / 0.19290396
=0.9755

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)
=(19691 / 28833) / (20419 / 29710)
=0.68293275 / 0.68727701
=0.9937

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 - (24873 + 4361) / 99816) / (1 - (23600 + 4841) / 99782)
=0.7071211 / 0.71496863
=0.989

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
=29710 / 28833
=1.0304

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))
=(2820 / (2820 + 4841)) / (2917 / (2917 + 4361))
=0.36809816 / 0.40079692
=0.9184

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)
=(9711 / 29710) / (9469 / 28833)
=0.32685964 / 0.32840842
=0.9953

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)
=((25921 + 14220) / 99816) / ((30247 + 7165) / 99782)
=0.40214996 / 0.37493736
=1.0726

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
=(4028 - 0 - 6880) / 99816
=-0.0286

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.

Medtronic PLC has a M-score of -2.65 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.

Medtronic PLC Annual Data

Apr08Apr09Apr10Apr11Apr12Apr13Apr14Apr15Apr16Apr17
DSRI 1.09290.87960.98561.15460.96650.95480.99761.12580.76460.9755
GMI 0.99650.981611.0010.99811.01121.00821.08221.00830.9937
AQI 1.1671.03050.95931.09630.69090.97880.90461.76431.07220.989
SGI 1.09891.08011.08350.99251.03081.02511.0251.19151.42311.0304
DEPI 0.98890.94960.97080.99690.96261.0180.9441.20550.59080.9184
SGAI 1.03141.15380.85921.01030.9521.03431.00110.9910.96380.9953
LVGI 1.00810.94741.07780.98150.96030.96651.06930.96170.93191.0726
TATA -0.0518-0.0844-0.0522-0.0304-0.0174-0.0444-0.0499-0.0209-0.0168-0.0286
M-score -2.49-2.93-2.68-2.44-2.67-2.70-2.76-1.90-2.38-2.65

Medtronic PLC Quarterly Data

Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17Apr17
DSRI 0.95091.12580.96370.90.83590.76460.90171.0041.09110.9755
GMI 1.00711.08221.10811.11721.1221.00830.97410.96820.96210.9937
AQI 0.68851.76431.7641.78372.57111.07221.05331.05821.04820.989
SGI 1.03681.19151.35281.49441.63051.42311.23481.11781.02771.0304
DEPI 0.97481.20550.95620.80920.70880.59080.74450.88191.01480.9184
SGAI 1.00720.9910.9770.96740.96610.96380.9750.98090.98110.9953
LVGI 1.42730.96170.94240.92750.69730.93190.97520.98470.97131.0726
TATA -0.0216-0.0209-0.0266-0.033-0.0328-0.0168-0.0234-0.0193-0.0253-0.0286
M-score -2.86-1.90-1.94-1.90-1.45-2.38-2.48-2.46-2.48-2.65
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