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GuruFocus has detected 4 Warning Signs with Telefonica SA $TEF.
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Telefonica SA (NYSE:TEF)
Beneish M-Score
-2.18 (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.

Telefonica SA has a M-score of -2.22 suggests that the company is not a manipulator.

TEF' s Beneish M-Score Range Over the Past 10 Years
Min: -7.04   Max: -0.68
Current: -2.18

-7.04
-0.68

During the past 13 years, the highest Beneish M-Score of Telefonica SA was -0.68. The lowest was -7.04. And the median was -2.29.


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 Telefonica SA 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 * 1.2026+0.528 * 0.9849+0.404 * 1.0563+0.892 * 0.9565+0.115 * 1.1189
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8357+4.679 * -0.0304-0.327 * 0.3982
=-2.22

* 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 $12,922 Mil.
Revenue was 14044.9197861 + 14473.628692 + 14680.1346801 + 14295.505618 = $57,494 Mil.
Gross Profit was 10055.6149733 + 10112.8691983 + 10544.332211 + 10084.2696629 = $40,797 Mil.
Total Current Assets was $26,030 Mil.
Total Assets was $137,031 Mil.
Property, Plant and Equipment(Net PPE) was $39,221 Mil.
Depreciation, Depletion and Amortization(DDA) was $10,678 Mil.
Selling, General & Admin. Expense(SGA) was $11,333 Mil.
Total Current Liabilities was $36,171 Mil.
Long-Term Debt was $0 Mil.
Net Income was 833.155080214 + 151.898734177 + 1103.25476992 + 778.651685393 = $2,867 Mil.
Non Operating Income was 2.13903743316 + 511.603375527 + 0 + 0 = $514 Mil.
Cash Flow from Operations was 2933.68983957 + 0 + 0 + 3578.65168539 = $6,512 Mil.
Accounts Receivable was $11,234 Mil.
Revenue was 13932.0712695 + 15100.2178649 + 15603.8159371 + 15475.8698092 = $60,112 Mil.
Gross Profit was 9839.64365256 + 10379.0849673 + 10943.8832772 + 10847.362514 = $42,010 Mil.
Total Current Assets was $34,561 Mil.
Total Assets was $136,046 Mil.
Property, Plant and Equipment(Net PPE) was $34,019 Mil.
Depreciation, Depletion and Amortization(DDA) was $10,710 Mil.
Selling, General & Admin. Expense(SGA) was $14,178 Mil.
Total Current Liabilities was $34,965 Mil.
Long-Term Debt was $55,212 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)
=(12921.9251337 / 57494.1887762) / (11233.8530067 / 60111.9748808)
=0.22475185 / 0.18688212
=1.2026

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)
=(42009.9744111 / 60111.9748808) / (40797.0860455 / 57494.1887762)
=0.69886199 / 0.70958625
=0.9849

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 - (26029.9465241 + 39221.3903743) / 137031.016043) / (1 - (34561.247216 + 34018.9309577) / 136045.657016)
=0.52382067 / 0.49590322
=1.0563

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
=57494.1887762 / 60111.9748808
=0.9565

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))
=(10709.5329909 / (10709.5329909 + 34018.9309577)) / (10677.7796435 / (10677.7796435 + 39221.3903743))
=0.2394344 / 0.21398712
=1.1189

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)
=(11332.5173335 / 57494.1887762) / (14177.5749842 / 60111.9748808)
=0.19710718 / 0.23585276
=0.8357

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)
=((0 + 36171.1229947) / 137031.016043) / ((55211.5812918 + 34965.4788419) / 136045.657016)
=0.26396304 / 0.66284409
=0.3982

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
=(2866.96026971 - 513.742412961 - 6512.34152497) / 137031.016043
=-0.0304

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.

Telefonica SA has a M-score of -2.22 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.

Telefonica SA Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.89360.88361.24891.18310.78740.53641.14571.47230.93931.0274
GMI 1.00580.98390.98541.02750.96530.99970.97451.04030.99370.9966
AQI 0.98550.99120.94051.16161.00680.94190.92451.09981.03840.967
SGI 1.15471.10010.92870.91681.19330.92810.83020.97890.89470.978
DEPI 1.02940.88441.14821.04310.88191.01791.07340.98940.97311.0125
SGAI 0.96890.67151.58121.71790.6461.28890.53651.18661.30030.828
LVGI 0.96131.03480.98060.94851.04120.99750.99510.97251.03070.968
TATA 0.07820.0047-0.0721-0.01730.03480.01010.04150.03320.0177-0.0299
M-score -2.06-2.46-2.76-2.49-2.32-2.99-2.26-1.87-2.60-2.59

Telefonica SA Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.47230.70970.68390.60310.93931.06971.27191.36531.02741.2026
GMI 1.04031.05291.07561.10420.99371.00140.99060.97540.99660.9849
AQI 1.09980.94250.98630.95551.03841.01851.12471.14160.9671.0563
SGI 0.97891.01651.11741.25360.89470.94080.90640.8690.9780.9565
DEPI 0.98940.81730.7750.67840.97311.03751.11051.19341.01251.1189
SGAI 1.18661.16591.10541.03251.30031.27811.31111.34620.8280.8357
LVGI 0.97250.98480.96481.03221.03071.02221.05090.98650.9680.3982
TATA 0.03320.04450.04190.04170.0177-0.0108-0.0433-0.042-0.0299-0.0304
M-score -1.87-2.56-2.47-2.44-2.60-2.56-2.53-2.45-2.59-2.22
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