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GuruFocus has detected 2 Warning Signs with National Oilwell Varco Inc $NOV.
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National Oilwell Varco Inc (NYSE:NOV)
Beneish M-Score
-8.20 (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.

National Oilwell Varco Inc has a M-score of -8.20 suggests that the company is not a manipulator.

NOV' s Beneish M-Score Range Over the Past 10 Years
Min: -11.72   Max: 0.7
Current: -8.2

-11.72
0.7

During the past 13 years, the highest Beneish M-Score of National Oilwell Varco Inc was 0.70. The lowest was -11.72. And the median was -2.26.


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 National Oilwell Varco 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 * 1.5939+0.528 * -8.9063+0.404 * 1.0439+0.892 * 0.561+0.115 * 0.9834
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.3333+4.679 * -0.132-0.327 * 0.9671
=-8.20

* 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 $1,978 Mil.
Revenue was 1741 + 1692 + 1646 + 1724 = $6,803 Mil.
Gross Profit was 209 + -459 + 79 + 35 = $-136 Mil.
Total Current Assets was $7,744 Mil.
Total Assets was $20,904 Mil.
Property, Plant and Equipment(Net PPE) was $3,108 Mil.
Depreciation, Depletion and Amortization(DDA) was $703 Mil.
Selling, General & Admin. Expense(SGA) was $1,211 Mil.
Total Current Liabilities was $2,852 Mil.
Long-Term Debt was $2,707 Mil.
Net Income was -122 + -714 + -1362 + -217 = $-2,415 Mil.
Non Operating Income was -11 + -18 + -36 + -41 = $-106 Mil.
Cash Flow from Operations was 111 + 153 + 58 + 128 = $450 Mil.
Accounts Receivable was $2,212 Mil.
Revenue was 2189 + 2722 + 3306 + 3909 = $12,126 Mil.
Gross Profit was 244 + 388 + 672 + 855 = $2,159 Mil.
Total Current Assets was $10,048 Mil.
Total Assets was $24,754 Mil.
Property, Plant and Equipment(Net PPE) was $3,303 Mil.
Depreciation, Depletion and Amortization(DDA) was $732 Mil.
Selling, General & Admin. Expense(SGA) was $1,619 Mil.
Total Current Liabilities was $3,435 Mil.
Long-Term Debt was $3,372 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)
=(1978 / 6803) / (2212 / 12126)
=0.29075408 / 0.18241794
=1.5939

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)
=(2159 / 12126) / (-136 / 6803)
=0.17804717 / -0.01999118
=-8.9063

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 - (7744 + 3108) / 20904) / (1 - (10048 + 3303) / 24754)
=0.48086491 / 0.46065282
=1.0439

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
=6803 / 12126
=0.561

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))
=(732 / (732 + 3303)) / (703 / (703 + 3108))
=0.18141264 / 0.18446602
=0.9834

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)
=(1211 / 6803) / (1619 / 12126)
=0.1780097 / 0.13351476
=1.3333

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)
=((2707 + 2852) / 20904) / ((3372 + 3435) / 24754)
=0.26592997 / 0.27498586
=0.9671

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
=(-2415 - -106 - 450) / 20904
=-0.132

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.

National Oilwell Varco Inc has a M-score of -8.20 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.

National Oilwell Varco Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.02360.16423.7391.15951.12551.11910.9670.84780.96271.4488
GMI 0.86670.95361.01850.94431.02751.04621.13620.95171.2942-15.0424
AQI 0.81621.72160.99290.98750.92750.9511.05350.9721.05141.0879
SGI 1.39331.37210.94650.95631.20581.1731.1721.06390.68830.4914
DEPI 0.89520.78450.91790.97521.16771.06950.97180.94720.97381.0576
SGAI 0.86831.08521.19381.09560.93410.90331.00341.01391.24221.5187
LVGI 1.01350.76860.82810.87520.99731.27881.01031.09650.97850.8989
TATA 0.0138-0.0189-0.02610.006-0.00610.0597-0.0315-0.0024-0.0767-0.1537
M-score -2.18-2.70-0.11-2.36-2.19-2.00-2.42-2.65-3.01-11.72

National Oilwell Varco Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.84780.69980.79630.87940.96270.96881.18451.16511.44881.5939
GMI 0.95170.99291.06491.12821.29421.49831.89122.6556-15.0424-8.9063
AQI 0.9721.02621.03991.10381.05141.07391.07471.00541.08791.0439
SGI 1.06391.0830.9860.84360.68830.56740.49640.46670.49140.561
DEPI 0.94720.92560.94090.94940.97381.07261.07111.09591.05760.9834
SGAI 1.01391.06321.05671.10681.24221.28941.45391.57241.51871.3333
LVGI 1.09651.14911.05781.04070.97850.82860.83040.84760.89890.9671
TATA -0.00240.00220.01420.0016-0.0767-0.1191-0.1416-0.2036-0.1537-0.132
M-score -2.65-2.73-2.60-2.65-3.01-3.14-2.94-2.92-11.72-8.20
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