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GuruFocus has detected 6 Warning Signs with Varian Medical Systems Inc $VAR.
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Varian Medical Systems Inc (NYSE:VAR)
Beneish M-Score
-2.71 (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.

Varian Medical Systems Inc has a M-score of -2.71 suggests that the company is not a manipulator.

VAR' s Beneish M-Score Range Over the Past 10 Years
Min: -3.07   Max: -2
Current: -2.71

-3.07
-2

During the past 13 years, the highest Beneish M-Score of Varian Medical Systems Inc was -2.00. The lowest was -3.07. And the median was -2.51.


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 Varian Medical Systems 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 * 0.8513+0.528 * 0.9373+0.404 * 1.25+0.892 * 1.0491+0.115 * 0.6604
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.2773+4.679 * -0.0221-0.327 * 1.0395
=-2.71

* 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 $762 Mil.
Revenue was 655 + 763.3 + 912.481 + 789.419 = $3,120 Mil.
Gross Profit was 275.3 + 334.5 + 387.96 + 346.43 = $1,344 Mil.
Total Current Assets was $2,142 Mil.
Total Assets was $3,119 Mil.
Property, Plant and Equipment(Net PPE) was $253 Mil.
Depreciation, Depletion and Amortization(DDA) was $83 Mil.
Selling, General & Admin. Expense(SGA) was $630 Mil.
Total Current Liabilities was $1,405 Mil.
Long-Term Debt was $277 Mil.
Net Income was 56.1 + 20.4 + 117.507 + 98.795 = $293 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 32.2 + 82.2 + 151.956 + 95.244 = $362 Mil.
Accounts Receivable was $853 Mil.
Revenue was 615.2 + 757.1 + 817.829 + 784.011 = $2,974 Mil.
Gross Profit was 258.1 + 309.7 + 318.178 + 314.976 = $1,201 Mil.
Total Current Assets was $2,773 Mil.
Total Assets was $3,866 Mil.
Property, Plant and Equipment(Net PPE) was $374 Mil.
Depreciation, Depletion and Amortization(DDA) was $73 Mil.
Selling, General & Admin. Expense(SGA) was $470 Mil.
Total Current Liabilities was $1,694 Mil.
Long-Term Debt was $313 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)
=(761.5 / 3120.2) / (852.634 / 2974.14)
=0.24405487 / 0.28668254
=0.8513

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)
=(1200.954 / 2974.14) / (1344.19 / 3120.2)
=0.40379875 / 0.43080251
=0.9373

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 - (2141.5 + 252.6) / 3118.8) / (1 - (2773.217 + 374.356) / 3866.258)
=0.23236501 / 0.18588646
=1.25

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
=3120.2 / 2974.14
=1.0491

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))
=(73.003 / (73.003 + 374.356)) / (82.9 / (82.9 + 252.6))
=0.16318661 / 0.24709389
=0.6604

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)
=(629.712 / 3120.2) / (469.928 / 2974.14)
=0.20181783 / 0.15800467
=1.2773

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)
=((277.2 + 1405.4) / 3118.8) / ((312.5 + 1694.14) / 3866.258)
=0.53950237 / 0.51901348
=1.0395

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
=(292.802 - 0 - 361.6) / 3118.8
=-0.0221

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.

Varian Medical Systems Inc has a M-score of -2.71 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.

Varian Medical Systems Inc Annual Data

Sep07Sep08Sep09Sep10Sep11Sep12Sep13Sep14Sep15Sep16
DSRI 0.97840.81331.11670.95690.97421.00760.96271.01151.03651.1142
GMI 0.99420.98490.97730.99680.99491.02641.00360.99491.03120.9784
AQI 1.40370.87790.87661.00110.88930.99730.90411.211.44080.9544
SGI 1.09841.17931.06971.06441.10191.0811.04841.03631.01621.0383
DEPI 1.17091.0970.99650.94630.98290.9111.02611.06511.01990.8801
SGAI 0.99430.98760.98250.92761.02151.02280.99061.10570.96981.0982
LVGI 1.06420.84430.91011.05711.14280.95281.07561.01941.0121.0403
TATA -0.0361-0.04690.0063-0.0432-0.0296-0.0228-0.0049-0.0135-0.01620.0121
M-score -2.42-2.70-2.31-2.68-2.65-2.49-2.55-2.44-2.31-2.36

Varian Medical Systems Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.90570.87970.87651.03651.14341.2381.29511.16621.0560.8513
GMI 0.99370.99531.01711.03121.05681.06391.01960.97710.9420.9373
AQI 1.09481.13821.01741.44081.27861.20341.46390.95441.25911.25
SGI 1.03371.02371.02851.01621.01370.97290.96320.9920.98781.0491
DEPI 1.01620.96660.96371.01991.00820.99960.96970.88010.86650.6604
SGAI 1.16931.06330.98350.96980.90110.9591.08061.11831.27031.2773
LVGI 1.04580.99621.00151.0121.08011.09941.09941.04030.94061.0395
TATA -0.02520-0.0257-0.0162-0.0163-0.01250.00680.0121-0.0075-0.0221
M-score -2.66-2.53-2.67-2.31-2.28-2.25-2.06-2.36-2.44-2.71
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