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GuruFocus has detected 3 Warning Signs with United Parcel Service Inc $UPS.
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United Parcel Service Inc (NYSE:UPS)
Beneish M-Score
-2.51 (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.

United Parcel Service Inc has a M-score of -2.51 suggests that the company is not a manipulator.

UPS' s Beneish M-Score Range Over the Past 10 Years
Min: -3.88   Max: -2.36
Current: -2.51

-3.88
-2.36

During the past 13 years, the highest Beneish M-Score of United Parcel Service Inc was -2.36. The lowest was -3.88. And the median was -2.75.


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 United Parcel Service 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 * 0.9871+0.528 * 1.0173+0.404 * 1.1215+0.892 * 1.051+0.115 * 1.0054
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0648+4.679 * -0.0165-0.327 * 1.096
=-2.51

* 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 $6,475 Mil.
Revenue was 15315 + 16931 + 14928 + 14629 = $61,803 Mil.
Gross Profit was 11639 + 12807 + 11541 + 11426 = $47,413 Mil.
Total Current Assets was $11,494 Mil.
Total Assets was $38,380 Mil.
Property, Plant and Equipment(Net PPE) was $19,225 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,226 Mil.
Selling, General & Admin. Expense(SGA) was $35,048 Mil.
Total Current Liabilities was $11,406 Mil.
Long-Term Debt was $12,938 Mil.
Net Income was 1158 + -239 + 1270 + 1269 = $3,458 Mil.
Non Operating Income was 15 + 12 + 13 + 8 = $48 Mil.
Cash Flow from Operations was 239 + 1110 + 670 + 2023 = $4,042 Mil.
Accounts Receivable was $6,241 Mil.
Revenue was 14418 + 16054 + 14237 + 14095 = $58,804 Mil.
Gross Profit was 11310 + 12398 + 11091 + 11092 = $45,891 Mil.
Total Current Assets was $13,912 Mil.
Total Assets was $39,168 Mil.
Property, Plant and Equipment(Net PPE) was $18,285 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,130 Mil.
Selling, General & Admin. Expense(SGA) was $31,317 Mil.
Total Current Liabilities was $11,098 Mil.
Long-Term Debt was $11,569 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)
=(6475 / 61803) / (6241 / 58804)
=0.10476838 / 0.10613224
=0.9871

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)
=(45891 / 58804) / (47413 / 61803)
=0.78040609 / 0.76716341
=1.0173

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 - (11494 + 19225) / 38380) / (1 - (13912 + 18285) / 39168)
=0.19960917 / 0.17797692
=1.1215

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
=61803 / 58804
=1.051

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))
=(2130 / (2130 + 18285)) / (2226 / (2226 + 19225))
=0.10433505 / 0.10377139
=1.0054

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)
=(35048 / 61803) / (31317 / 58804)
=0.56709221 / 0.53256581
=1.0648

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)
=((12938 + 11406) / 38380) / ((11569 + 11098) / 39168)
=0.63428869 / 0.57871221
=1.096

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
=(3458 - 48 - 4042) / 38380
=-0.0165

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.

United Parcel Service Inc has a M-score of -2.51 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.

United Parcel Service Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.881.10020.95821.03560.95991.03880.97531.06861.0336
GMI 1.04540.94821.06171.02490.99520.99521.00840.95941.0066
AQI 0.60720.97050.95141.00051.00130.97061.2481.05121.0861
SGI 1.03610.87981.09381.07191.01921.02421.05041.00221.0436
DEPI 0.99521.02010.94791.01740.97630.9990.98930.93330.964
SGAI 1.06131.08470.7851.03831.09880.84231.06830.96611.0738
LVGI 1.10240.95461.04361.040.98770.98921.05151.1021.0399
TATA -0.1725-0.0986-0.0149-0.0955-0.1655-0.0815-0.0766-0.0679-0.0766
M-score -3.54-2.99-2.47-2.83-3.29-2.79-2.74-2.77-2.76

United Parcel Service Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.97530.94150.93291.02411.06861.08341.06791.00431.03360.9871
GMI 1.00840.99720.98340.97060.95940.96570.97860.99041.00661.0173
AQI 1.2481.16681.09011.40821.05121.20451.22750.98111.08611.1215
SGI 1.05041.04751.03031.01551.00221.00641.01861.03141.04361.051
DEPI 0.98930.96020.94980.94990.93330.94630.93970.94880.9641.0054
SGAI 1.06831.07021.00981.02370.96610.96210.98430.97691.07381.0648
LVGI 1.05151.07151.03451.06431.1021.05131.03451.03961.03991.096
TATA -0.0766-0.0827-0.1132-0.1023-0.0679-0.062-0.0764-0.037-0.0766-0.0165
M-score -2.74-2.85-3.04-2.80-2.77-2.64-2.69-2.65-2.76-2.51
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