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GuruFocus has detected 3 Warning Signs with Nuance Communications Inc $NUAN.
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Nuance Communications Inc (NAS:NUAN)
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.

Nuance Communications Inc has a M-score of -2.89 suggests that the company is not a manipulator.

NUAN' s Beneish M-Score Range Over the Past 10 Years
Min: -10000000   Max: 10000000
Current: -2.9

-10000000
10000000

During the past 13 years, the highest Beneish M-Score of Nuance Communications Inc was 10000000.00. The lowest was -10000000.00. And the median was -2.60.


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 Nuance 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 * 1.0413+0.528 * 1.0064+0.404 * 0.9244+0.892 * 1.0125+0.115 * 0.9495
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9562+4.679 * -0.0926-0.327 * 1.0162
=-2.89

* 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 $386 Mil.
Revenue was 499.573 + 487.658 + 506.204 + 477.851 = $1,971 Mil.
Gross Profit was 286.155 + 275.248 + 295.68 + 269.973 = $1,127 Mil.
Total Current Assets was $1,265 Mil.
Total Assets was $5,874 Mil.
Property, Plant and Equipment(Net PPE) was $168 Mil.
Depreciation, Depletion and Amortization(DDA) was $232 Mil.
Selling, General & Admin. Expense(SGA) was $556 Mil.
Total Current Liabilities was $1,080 Mil.
Long-Term Debt was $2,218 Mil.
Net Income was -33.808 + -23.929 + 18.474 + -11.821 = $-51 Mil.
Non Operating Income was -19.623 + -0.61 + -1.206 + -0.489 = $-22 Mil.
Cash Flow from Operations was 125.434 + 124.9 + 138.868 + 125.864 = $515 Mil.
Accounts Receivable was $366 Mil.
Revenue was 478.733 + 486.115 + 504.119 + 477.939 = $1,947 Mil.
Gross Profit was 273.233 + 280.517 + 292.924 + 273.539 = $1,120 Mil.
Total Current Assets was $768 Mil.
Total Assets was $5,257 Mil.
Property, Plant and Equipment(Net PPE) was $189 Mil.
Depreciation, Depletion and Amortization(DDA) was $232 Mil.
Selling, General & Admin. Expense(SGA) was $574 Mil.
Total Current Liabilities was $772 Mil.
Long-Term Debt was $2,132 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)
=(385.895 / 1971.286) / (365.996 / 1946.906)
=0.195758 / 0.18798853
=1.0413

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)
=(1120.213 / 1946.906) / (1127.056 / 1971.286)
=0.57538114 / 0.57173642
=1.0064

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 - (1264.782 + 167.985) / 5874.351) / (1 - (767.573 + 189.414) / 5256.636)
=0.75609782 / 0.81794688
=0.9244

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
=1971.286 / 1946.906
=1.0125

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))
=(232.451 / (232.451 + 189.414)) / (232.292 / (232.292 + 167.985))
=0.55100802 / 0.58032812
=0.9495

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)
=(555.969 / 1971.286) / (574.272 / 1946.906)
=0.28203366 / 0.29496648
=0.9562

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)
=((2217.869 + 1079.656) / 5874.351) / ((2131.572 + 772.109) / 5256.636)
=0.56134286 / 0.55238388
=1.0162

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
=(-51.084 - -21.928 - 515.066) / 5874.351
=-0.0926

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.

Nuance Communications Inc has a M-score of -2.89 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.

Nuance Communications Inc Annual Data

Sep07Sep08Sep09Sep10Sep11Sep12Sep13Sep14Sep15Sep16
DSRI 1.03690.72060.87490.88541.09521.08440.89331.07930.86791.0091
GMI 1.02581.05431.02390.98031.02120.97991.07991.04420.98470.9937
AQI 1.0351.01770.94351.00391.01560.88921.07261.04161.02640.9957
SGI 1.54951.44261.09431.17741.17861.25231.12341.03671.0041.0092
DEPI 0.97580.83740.95190.99731.04481.11171.09321.05170.96960.9964
SGAI 0.9150.89710.86261.03620.99220.93651.00250.99050.96490.929
LVGI 1.16980.84210.80830.9030.99111.4361.04990.97321.04071.1143
TATA -0.0554-0.0792-0.0815-0.0852-0.0806-0.0497-0.0841-0.0868-0.1058-0.1006
M-score -2.23-2.63-2.82-2.81-2.58-2.58-2.80-2.72-3.10-2.96

Nuance Communications Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.01380.99560.90060.86790.8920.91930.98511.00911.02371.0413
GMI 1.02391.0090.97930.98470.97520.98240.9970.99371.00821.0064
AQI 1.02481.04081.08271.02641.01541.05420.97780.99570.92050.9244
SGI 1.03461.02081.0191.0041.00821.01041.00911.00921.00371.0125
DEPI 1.11061.09141.07780.96960.97350.99630.98090.99640.98070.9495
SGAI 0.98760.98080.98910.96490.92990.92770.92390.9290.96810.9562
LVGI 0.95950.98580.98371.04071.04161.1421.16951.11431.19991.0162
TATA -0.0899-0.0935-0.0926-0.1058-0.1056-0.1174-0.1119-0.1006-0.0923-0.0926
M-score -2.81-2.86-2.95-3.10-3.08-3.12-3.06-2.96-2.98-2.89
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