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GuruFocus has detected 3 Warning Signs with Staples Inc $SPLS.
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Staples Inc (NAS:SPLS)
Beneish M-Score
-4.96 (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.

Staples Inc has a M-score of -4.96 suggests that the company is not a manipulator.

SPLS' s Beneish M-Score Range Over the Past 10 Years
Min: -4.96   Max: 4.23
Current: -4.96

-4.96
4.23

During the past 13 years, the highest Beneish M-Score of Staples Inc was 4.23. The lowest was -4.96. And the median was -2.54.


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 Staples 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 * 0.751+0.528 * 0.9946+0.404 * 0.5296+0.892 * 0.968+0.115 * 0.8063
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9951+4.679 * -0.4338-0.327 * 0.9323
=-4.96

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

This Year (Apr17) TTM:Last Year (Apr16) TTM:
Accounts Receivable was $1,342 Mil.
Revenue was 4149 + 3039 + 5355 + 4752 = $17,295 Mil.
Gross Profit was 1078 + 835 + 1443 + 1192 = $4,548 Mil.
Total Current Assets was $4,585 Mil.
Total Assets was $7,510 Mil.
Property, Plant and Equipment(Net PPE) was $1,071 Mil.
Depreciation, Depletion and Amortization(DDA) was $414 Mil.
Selling, General & Admin. Expense(SGA) was $3,620 Mil.
Total Current Liabilities was $3,194 Mil.
Long-Term Debt was $526 Mil.
Net Income was -815 + -952 + 179 + -766 = $-2,354 Mil.
Non Operating Income was 4 + 10 + -4 + -22 = $-12 Mil.
Cash Flow from Operations was 258 + 304 + 641 + -287 = $916 Mil.
Accounts Receivable was $1,846 Mil.
Revenue was 4363 + 2973 + 5593 + 4937 = $17,866 Mil.
Gross Profit was 1112 + 775 + 1522 + 1264 = $4,673 Mil.
Total Current Assets was $5,289 Mil.
Total Assets was $12,815 Mil.
Property, Plant and Equipment(Net PPE) was $1,552 Mil.
Depreciation, Depletion and Amortization(DDA) was $450 Mil.
Selling, General & Admin. Expense(SGA) was $3,758 Mil.
Total Current Liabilities was $3,320 Mil.
Long-Term Debt was $3,489 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)
=(1342 / 17295) / (1846 / 17866)
=0.07759468 / 0.10332475
=0.751

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)
=(4673 / 17866) / (4548 / 17295)
=0.26155827 / 0.26296618
=0.9946

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 - (4585 + 1071) / 7510) / (1 - (5289 + 1552) / 12815)
=0.24687084 / 0.46617245
=0.5296

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
=17295 / 17866
=0.968

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))
=(450 / (450 + 1552)) / (414 / (414 + 1071))
=0.22477522 / 0.27878788
=0.8063

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)
=(3620 / 17295) / (3758 / 17866)
=0.20930905 / 0.21034367
=0.9951

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)
=((526 + 3194) / 7510) / ((3489 + 3320) / 12815)
=0.49533955 / 0.53133047
=0.9323

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
=(-2354 - -12 - 916) / 7510
=-0.4338

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.

Staples Inc has a M-score of -4.96 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.

Staples Inc Annual Data

Jan08Jan09Jan10Jan11Jan12Jan13Jan14Jan15Jan16Jan17
DSRI 1.06941.87930.93551.08511.01090.90991.06821.23130.83951.0683
GMI 0.99821.05881.01480.98491.00171.01531.02021.01980.97840.9995
AQI 1.08231.48541.02810.97090.98960.88981.08510.97381.04750.6169
SGI 1.06671.19161.05160.99421.02950.98120.94810.85160.95330.9331
DEPI 0.96170.78890.95071.07871.00190.9461.01110.91510.82230.9489
SGAI 1.00560.97491.00760.99051.01050.99021.02261.01581.02250.9824
LVGI 0.88351.59560.87870.990.93161.0450.88561.06881.00731.2005
TATA -0.0402-0.0668-0.0984-0.0399-0.0438-0.1093-0.0437-0.0883-0.0576-0.2926
M-score -2.48-1.80-2.90-2.60-2.63-3.15-2.59-2.85-2.96-4.07

Staples Inc Quarterly Data

Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17Apr17
DSRI 1.23131.21.21581.21980.83951.06881.04391.01321.06830.751
GMI 1.01981.00220.99170.98390.97840.98570.99661.00490.99950.9946
AQI 0.97380.91540.90030.91191.04751.42570.8990.87730.61690.5296
SGI 0.85160.84050.83160.82080.95330.92610.93010.93580.93310.968
DEPI 0.91510.90990.9050.9240.82230.98580.97270.95360.94890.8063
SGAI 1.01581.01421.0081.00271.02251.00310.99650.98280.98240.9951
LVGI 1.06881.05531.0671.02361.00731.25731.0851.07991.20050.9323
TATA -0.0883-0.0852-0.0953-0.0771-0.0576-0.0455-0.1137-0.1426-0.2926-0.4338
M-score -2.85-2.90-2.96-2.86-2.96-2.62-3.11-3.27-4.07-4.96
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