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GuruFocus has detected 4 Warning Signs with Sherwin-Williams Co $SHW.
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Sherwin-Williams Co (NYSE:SHW)
Beneish M-Score
-2.72 (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.

Sherwin-Williams Co has a M-score of -2.72 suggests that the company is not a manipulator.

SHW' s Beneish M-Score Range Over the Past 10 Years
Min: -3.23   Max: -2.13
Current: -2.72

-3.23
-2.13

During the past 13 years, the highest Beneish M-Score of Sherwin-Williams Co was -2.13. The lowest was -3.23. And the median was -2.65.


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 Sherwin-Williams Co 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 * 1.0006+0.528 * 0.9954+0.404 * 0.846+0.892 * 1.0506+0.115 * 0.9965
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9876+4.679 * -0.0564-0.327 * 0.8597
=-2.72

* 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 $1,357 Mil.
Revenue was 2761.387 + 2782.591 + 3279.462 + 3219.525 = $12,043 Mil.
Gross Profit was 1343.14 + 1388.438 + 1636.289 + 1635.793 = $6,004 Mil.
Total Current Assets was $3,877 Mil.
Total Assets was $6,989 Mil.
Property, Plant and Equipment(Net PPE) was $1,063 Mil.
Depreciation, Depletion and Amortization(DDA) was $200 Mil.
Selling, General & Admin. Expense(SGA) was $4,186 Mil.
Total Current Liabilities was $2,939 Mil.
Long-Term Debt was $1,212 Mil.
Net Income was 239.152 + 203.03 + 386.733 + 378.064 = $1,207 Mil.
Non Operating Income was 4.367 + -6.652 + 0.725 + 0.052 = $-2 Mil.
Cash Flow from Operations was 231.816 + 342.038 + 456.551 + 572.042 = $1,602 Mil.
Accounts Receivable was $1,291 Mil.
Revenue was 2574.024 + 2604.596 + 3152.285 + 3132.139 = $11,463 Mil.
Gross Profit was 1261.745 + 1322.239 + 1574.552 + 1529.986 = $5,689 Mil.
Total Current Assets was $2,889 Mil.
Total Assets was $6,038 Mil.
Property, Plant and Equipment(Net PPE) was $1,057 Mil.
Depreciation, Depletion and Amortization(DDA) was $198 Mil.
Selling, General & Admin. Expense(SGA) was $4,034 Mil.
Total Current Liabilities was $2,263 Mil.
Long-Term Debt was $1,909 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)
=(1356.851 / 12042.965) / (1290.749 / 11463.044)
=0.11266752 / 0.11260089
=1.0006

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)
=(5688.522 / 11463.044) / (6003.66 / 12042.965)
=0.49624881 / 0.49852009
=0.9954

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 - (3876.664 + 1063.095) / 6988.903) / (1 - (2888.625 + 1057.025) / 6038.309)
=0.29319966 / 0.34656375
=0.846

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
=12042.965 / 11463.044
=1.0506

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))
=(197.834 / (197.834 + 1057.025)) / (199.811 / (199.811 + 1063.095))
=0.15765437 / 0.15821526
=0.9965

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)
=(4185.935 / 12042.965) / (4034.498 / 11463.044)
=0.34758342 / 0.35195695
=0.9876

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)
=((1211.512 + 2939.002) / 6988.903) / ((1908.774 + 2262.561) / 6038.309)
=0.59387203 / 0.69081178
=0.8597

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
=(1206.979 - -1.508 - 1602.447) / 6988.903
=-0.0564

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.

Sherwin-Williams Co has a M-score of -2.72 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.

Sherwin-Williams Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.9820.88721.01681.20140.9580.9590.99520.94250.96741.0566
GMI 0.97251.02530.95321.02751.04790.96830.97330.97680.94650.9814
AQI 1.13090.95971.07630.96580.99230.8841.0151.07430.97090.835
SGI 1.0250.99680.8891.09621.12721.08771.06831.09271.01881.0455
DEPI 0.97330.95310.93441.11070.97771.01631.00760.95241.01871.0474
SGAI 1.01511.02171.07640.97670.9631.01190.99581.01881.00271.016
LVGI 1.05841.01180.9921.04241.02121.05031.01651.16461.05180.854
TATA -0.0538-0.0893-0.0932-0.0471-0.0571-0.0428-0.0514-0.0405-0.0673-0.0251
M-score -2.71-3.02-3.01-2.43-2.65-2.72-2.68-2.68-2.86-2.53

Sherwin-Williams Co Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.94250.97380.98260.97810.96741.02270.99130.99821.05661.0006
GMI 0.97680.97420.96510.95380.94650.94010.94380.96230.98140.9954
AQI 1.07430.99670.98481.00670.97090.97060.91510.8670.8350.846
SGI 1.09271.07981.05491.0261.01881.02231.02191.0331.04551.0506
DEPI 0.95240.95650.97990.99941.01871.05591.05381.04511.04740.9965
SGAI 1.01881.01231.00691.01181.00271.01051.01671.01931.0160.9876
LVGI 1.16461.32971.2031.09311.05180.89940.93190.92630.8540.8597
TATA -0.0405-0.0418-0.0278-0.0176-0.0673-0.0574-0.0731-0.0553-0.0251-0.0564
M-score -2.68-2.76-2.67-2.61-2.86-2.71-2.85-2.76-2.53-2.72
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