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GuruFocus has detected 6 Warning Signs with Sears Holdings Corp $SHLD.
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Sears Holdings Corp (NAS:SHLD)
Beneish M-Score
-2.84 (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.

Sears Holdings Corp has a M-score of -2.84 suggests that the company is not a manipulator.

SHLD' s Beneish M-Score Range Over the Past 10 Years
Min: -3.16   Max: -1.58
Current: -2.84

-3.16
-1.58

During the past 13 years, the highest Beneish M-Score of Sears Holdings Corp was -1.58. The lowest was -3.16. And the median was -2.68.


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 Sears Holdings Corp 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 * 1.2633+0.528 * 1.0915+0.404 * 0.9675+0.892 * 0.8804+0.115 * 0.9639
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.012+4.679 * -0.0882-0.327 * 1.3333
=-2.84

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Jan17) TTM:Last Year (Jan16) TTM:
Accounts Receivable was $466 Mil.
Revenue was 6052 + 5029 + 5663 + 5394 = $22,138 Mil.
Gross Profit was 1287 + 962 + 1260 + 1177 = $4,686 Mil.
Total Current Assets was $4,996 Mil.
Total Assets was $9,362 Mil.
Property, Plant and Equipment(Net PPE) was $2,240 Mil.
Depreciation, Depletion and Amortization(DDA) was $375 Mil.
Selling, General & Admin. Expense(SGA) was $6,109 Mil.
Total Current Liabilities was $4,681 Mil.
Long-Term Debt was $3,808 Mil.
Net Income was -607 + -748 + -395 + -471 = $-2,221 Mil.
Non Operating Income was -14 + 0 + -1 + 1 = $-14 Mil.
Cash Flow from Operations was 27 + -768 + 82 + -722 = $-1,381 Mil.
Accounts Receivable was $419 Mil.
Revenue was 7303 + 5750 + 6211 + 5882 = $25,146 Mil.
Gross Profit was 1595 + 1262 + 1435 + 1518 = $5,810 Mil.
Total Current Assets was $6,045 Mil.
Total Assets was $11,337 Mil.
Property, Plant and Equipment(Net PPE) was $2,631 Mil.
Depreciation, Depletion and Amortization(DDA) was $422 Mil.
Selling, General & Admin. Expense(SGA) was $6,857 Mil.
Total Current Liabilities was $5,438 Mil.
Long-Term Debt was $2,272 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)
=(466 / 22138) / (419 / 25146)
=0.02104978 / 0.01666269
=1.2633

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)
=(5810 / 25146) / (4686 / 22138)
=0.23105066 / 0.21167224
=1.0915

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 - (4996 + 2240) / 9362) / (1 - (6045 + 2631) / 11337)
=0.22708823 / 0.23471818
=0.9675

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
=22138 / 25146
=0.8804

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))
=(422 / (422 + 2631)) / (375 / (375 + 2240))
=0.1382247 / 0.14340344
=0.9639

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)
=(6109 / 22138) / (6857 / 25146)
=0.27595085 / 0.2726875
=1.012

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)
=((3808 + 4681) / 9362) / ((2272 + 5438) / 11337)
=0.90675069 / 0.68007409
=1.3333

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
=(-2221 - -14 - -1381) / 9362
=-0.0882

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.

Sears Holdings Corp has a M-score of -2.84 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.

Sears Holdings Corp Annual Data

Jan08Jan09Jan10Jan11Jan12Jan13Jan14Jan15Jan16Jan17
DSRI 0.91411.22250.82521.09091.03530.95290.95910.89981.21181.2633
GMI 1.0331.02540.97511.01481.0720.96671.09041.05580.99181.0915
AQI 1.13231.10050.99111.0250.91180.97511.02911.01821.07720.9675
SGI 0.95640.92240.94170.96870.97430.95880.9080.86210.8060.8804
DEPI 1.05310.97871.00840.98370.94960.95211.00921.03450.83560.9639
SGAI 1.0361.04551.02291.01011.04991.04260.96951.01611.0351.012
LVGI 1.04130.94570.94521.13611.17181.01331.12681.09121.03281.3333
TATA -0.0269-0.0413-0.0488-0.011-0.1337-0.0325-0.0252-0.03250.0971-0.0882
M-score -2.67-2.48-2.92-2.51-3.16-2.76-2.69-2.84-2.01-2.84

Sears Holdings Corp Quarterly Data

Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17
DSRI 1.13390.89981.02871.13091.12991.21181.09180.96350.86861.2633
GMI 1.09741.05581.01030.96340.95150.99181.0561.08571.1181.0915
AQI 1.00511.01821.14031.12431.13481.07721.04831.08991.02230.9675
SGI 0.890.86210.81990.78830.770.8060.84440.880.90160.8804
DEPI 0.97931.03451.05710.73050.82910.83560.82551.19691.08960.9639
SGAI 0.9871.01611.02951.03191.03051.0351.01250.99511.01021.012
LVGI 1.18841.09121.07480.96990.9181.03281.02871.13151.1991.3333
TATA -0.0469-0.0325-0.02690.04090.05180.09710.10020.013-0.0561-0.0882
M-score -2.68-2.84-2.70-2.35-2.29-2.01-2.05-2.50-2.94-2.84
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