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GuruFocus has detected 7 Warning Signs with The Wendy's Co $WEN.
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The Wendy's Co (NAS:WEN)
Beneish M-Score
-2.53 (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.

The Wendy's Co has a M-score of -2.53 suggests that the company is not a manipulator.

WEN' s Beneish M-Score Range Over the Past 10 Years
Min: -5.73   Max: 6.2
Current: -2.53

-5.73
6.2

During the past 13 years, the highest Beneish M-Score of The Wendy's Co was 6.20. The lowest was -5.73. And the median was -2.58.


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 The Wendy's 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 * 1.3742+0.528 * 0.7949+0.404 * 1.0573+0.892 * 0.7469+0.115 * 1.1817
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1964+4.679 * -0.0113-0.327 * 1.0504
=-2.53

* 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 $90 Mil.
Revenue was 285.819 + 309.901 + 364.012 + 382.718 = $1,342 Mil.
Gross Profit was 143.544 + 101.276 + 177.466 + 180.164 = $602 Mil.
Total Current Assets was $439 Mil.
Total Assets was $3,952 Mil.
Property, Plant and Equipment(Net PPE) was $1,191 Mil.
Depreciation, Depletion and Amortization(DDA) was $120 Mil.
Selling, General & Admin. Expense(SGA) was $234 Mil.
Total Current Liabilities was $209 Mil.
Long-Term Debt was $2,528 Mil.
Net Income was 22.341 + 28.891 + 48.89 + 26.48 = $127 Mil.
Non Operating Income was 0.389 + 0.676 + 0.498 + 0.276 = $2 Mil.
Cash Flow from Operations was 38.652 + 50.611 + 29.839 + 50.15 = $169 Mil.
Accounts Receivable was $88 Mil.
Revenue was 378.787 + 464.365 + 464.629 + 489.534 = $1,797 Mil.
Gross Profit was 149.394 + 144.27 + 173.105 + 174.412 = $641 Mil.
Total Current Assets was $607 Mil.
Total Assets was $4,150 Mil.
Property, Plant and Equipment(Net PPE) was $1,236 Mil.
Depreciation, Depletion and Amortization(DDA) was $150 Mil.
Selling, General & Admin. Expense(SGA) was $262 Mil.
Total Current Liabilities was $257 Mil.
Long-Term Debt was $2,479 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)
=(90.324 / 1342.45) / (87.999 / 1797.315)
=0.06728295 / 0.04896137
=1.3742

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)
=(641.181 / 1797.315) / (602.45 / 1342.45)
=0.35674381 / 0.44876904
=0.7949

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 - (438.53 + 1190.55) / 3952.325) / (1 - (607.355 + 1235.596) / 4150.31)
=0.5878173 / 0.55594859
=1.0573

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
=1342.45 / 1797.315
=0.7469

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))
=(150.142 / (150.142 + 1235.596)) / (120.179 / (120.179 + 1190.55))
=0.10834804 / 0.09168867
=1.1817

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)
=(233.673 / 1342.45) / (261.501 / 1797.315)
=0.17406458 / 0.14549536
=1.1964

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)
=((2527.819 + 208.614) / 3952.325) / ((2478.581 + 256.995) / 4150.31)
=0.69236032 / 0.6591257
=1.0504

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
=(126.602 - 1.839 - 169.252) / 3952.325
=-0.0113

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.

The Wendy's Co has a M-score of -2.53 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.

The Wendy's Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.62552.46470.70480.8290.71131.05871.09011.24341.72231.2183
GMI 1.03621.21870.87111.01950.99411.01590.93920.8760.88690.8055
AQI 1.22931.0020.92731.02981.07380.98890.95771.08190.97681.0569
SGI 1.01641.44241.3371.07840.92511.03040.96740.83070.9290.7675
DEPI 0.95212.44220.45191.00040.96740.98970.74881.28491.02551.1785
SGAI 0.8570.83961.0620.89190.93050.95531.04711.07971.05611.2487
LVGI 1.05690.53971.1651.05110.94241.02291.01091.0251.55951.061
TATA -0.0377-0.0975-0.0569-0.0449-0.0556-0.0339-0.0635-0.0327-0.0236-0.0136
M-score -2.87-0.73-2.94-2.75-3.02-2.55-2.81-2.58-2.25-2.67

The Wendy's Co Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.24341.45871.11761.21081.72231.24461.86231.69691.21831.3742
GMI 0.8760.88570.92150.94420.88690.87640.82880.7990.80550.7949
AQI 1.08191.00970.81471.01750.97680.9961.22951.00691.05691.0573
SGI 0.83070.82870.87560.92150.9290.92560.87810.83980.76750.7469
DEPI 1.28491.33081.24641.09811.02550.98711.05831.19741.17851.1817
SGAI 1.07971.02040.97130.9551.05611.12641.21641.25651.24871.1964
LVGI 1.0251.00041.25461.57291.55951.57961.27441.01851.0611.0504
TATA -0.0327-0.0389-0.0209-0.021-0.0236-0.0309-0.0406-0.0222-0.0136-0.0113
M-score -2.58-2.41-2.75-2.65-2.25-2.75-2.10-2.22-2.67-2.53
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