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GuruFocus has detected 4 Warning Signs with Office Depot Inc $ODP.
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Office Depot Inc (NAS:ODP)
Beneish M-Score
-2.69 (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.

Office Depot Inc has a M-score of -2.69 suggests that the company is not a manipulator.

ODP' s Beneish M-Score Range Over the Past 10 Years
Min: -5.36   Max: 2.58
Current: -2.69

-5.36
2.58

During the past 13 years, the highest Beneish M-Score of Office Depot Inc was 2.58. The lowest was -5.36. And the median was -2.57.


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 Office Depot 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 * 0.6586+0.528 * 1.0019+0.404 * 1.3492+0.892 * 0.9446+0.115 * 1.0152
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9913+4.679 * -0.0064-0.327 * 0.885
=-2.69

* 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 $688 Mil.
Revenue was 2676 + 2726 + 2836 + 3218 = $11,456 Mil.
Gross Profit was 675 + 654 + 726 + 747 = $2,802 Mil.
Total Current Assets was $2,924 Mil.
Total Assets was $5,435 Mil.
Property, Plant and Equipment(Net PPE) was $586 Mil.
Depreciation, Depletion and Amortization(DDA) was $173 Mil.
Selling, General & Admin. Expense(SGA) was $2,370 Mil.
Total Current Liabilities was $1,846 Mil.
Long-Term Debt was $1,145 Mil.
Net Income was 116 + 229 + 44 + 210 = $599 Mil.
Non Operating Income was 1 + 0 + -14 + 0 = $-13 Mil.
Cash Flow from Operations was 88 + 45 + 299 + 215 = $647 Mil.
Accounts Receivable was $1,106 Mil.
Revenue was 2876 + 2766 + 3046 + 3440 = $12,128 Mil.
Gross Profit was 715 + 656 + 787 + 814 = $2,972 Mil.
Total Current Assets was $3,696 Mil.
Total Assets was $6,034 Mil.
Property, Plant and Equipment(Net PPE) was $754 Mil.
Depreciation, Depletion and Amortization(DDA) was $227 Mil.
Selling, General & Admin. Expense(SGA) was $2,531 Mil.
Total Current Liabilities was $2,315 Mil.
Long-Term Debt was $1,437 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)
=(688 / 11456) / (1106 / 12128)
=0.06005587 / 0.09119393
=0.6586

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)
=(2972 / 12128) / (2802 / 11456)
=0.24505277 / 0.24458799
=1.0019

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 - (2924 + 586) / 5435) / (1 - (3696 + 754) / 6034)
=0.35418583 / 0.26251243
=1.3492

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
=11456 / 12128
=0.9446

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))
=(227 / (227 + 754)) / (173 / (173 + 586))
=0.23139653 / 0.22793149
=1.0152

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)
=(2370 / 11456) / (2531 / 12128)
=0.20687849 / 0.20869063
=0.9913

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)
=((1145 + 1846) / 5435) / ((1437 + 2315) / 6034)
=0.55032199 / 0.62180974
=0.885

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
=(599 - -13 - 647) / 5435
=-0.0064

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.

Office Depot Inc has a M-score of -2.69 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.

Office Depot Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.98720.88981.06570.89740.90651.00091.57750.83860.57141.0373
GMI 1.06761.04940.98930.96791.22570.9931.01490.99780.96240.9978
AQI 1.04370.41530.74381.01261.22961.10372.07551.03851.0831.3314
SGI 1.03440.93350.83780.95790.98760.9311.0511.13071.03290.8878
DEPI 1.08841.07250.940.97810.92420.86131.39230.61630.81061.1907
SGAI 0.9861.08161.06590.96120.78891.00620.99840.9720.9430.9998
LVGI 0.91391.2751.00461.03990.96480.99510.94891.08730.99910.8845
TATA -0.0061-0.374-0.1861-0.0618-0.02-0.0696-0.0389-0.0666-0.02050.0092
M-score -2.40-4.70-3.56-2.92-2.42-2.84-1.58-2.88-2.94-2.31

Office Depot Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.83860.96361.08451.37120.57140.92890.89470.53911.03730.6586
GMI 0.99780.97730.97050.95860.96240.96670.97981.00020.99781.0019
AQI 1.03851.05221.05961.00861.0831.04050.99131.27611.33141.3492
SGI 1.13070.950.82750.68631.03290.99131.00621.0820.88780.9446
DEPI 0.61630.71830.80530.99890.81061.01991.10390.92711.19071.0152
SGAI 0.9720.97750.91840.92870.9430.95550.99431.0040.99980.9913
LVGI 1.08731.05311.00381.01140.99910.98560.95950.92920.88450.885
TATA -0.0666-0.0495-0.0305-0.0331-0.0205-0.0181-0.0233-0.03330.0092-0.0064
M-score -2.88-2.83-2.70-2.58-2.94-2.62-2.67-2.86-2.31-2.69
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