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GuruFocus has detected 4 Warning Signs with Wells Fargo & Co $WFC.
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Wells Fargo & Co (NYSE:WFC)
Beneish M-Score
-2.48 (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.

Wells Fargo & Co has a M-score of -2.48 suggests that the company is not a manipulator.

WFC' s Beneish M-Score Range Over the Past 10 Years
Min: -3.36   Max: 0.52
Current: -2.48

-3.36
0.52

During the past 13 years, the highest Beneish M-Score of Wells Fargo & Co was 0.52. The lowest was -3.36. And the median was -2.41.


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 Wells Fargo & 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+0.528 * 1+0.404 * 1.0003+0.892 * 1.0126+0.115 * 0.8511
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.042+4.679 * 0.0074-0.327 * 1.0664
=-2.48

* 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 $0 Mil.
Revenue was 22002 + 21582 + 22328 + 22162 = $88,074 Mil.
Gross Profit was 22002 + 21582 + 22328 + 22162 = $88,074 Mil.
Total Current Assets was $0 Mil.
Total Assets was $1,951,564 Mil.
Property, Plant and Equipment(Net PPE) was $8,320 Mil.
Depreciation, Depletion and Amortization(DDA) was $4,912 Mil.
Selling, General & Admin. Expense(SGA) was $33,609 Mil.
Total Current Liabilities was $0 Mil.
Long-Term Debt was $256,468 Mil.
Net Income was 5457 + 5274 + 5644 + 5558 = $21,933 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 13191 + 4682 + -2441 + -7986 = $7,446 Mil.
Accounts Receivable was $0 Mil.
Revenue was 22195 + 21586 + 21875 + 21318 = $86,974 Mil.
Gross Profit was 22195 + 21586 + 21875 + 21318 = $86,974 Mil.
Total Current Assets was $0 Mil.
Total Assets was $1,849,182 Mil.
Property, Plant and Equipment(Net PPE) was $8,349 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,856 Mil.
Selling, General & Admin. Expense(SGA) was $31,850 Mil.
Total Current Liabilities was $0 Mil.
Long-Term Debt was $227,888 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)
=(0 / 88074) / (0 / 86974)
=0 / 0
=1

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)
=(86974 / 86974) / (88074 / 88074)
=1 / 1
=1

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 - (0 + 8320) / 1951564) / (1 - (0 + 8349) / 1849182)
=0.99573675 / 0.99548503
=1.0003

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
=88074 / 86974
=1.0126

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))
=(3856 / (3856 + 8349)) / (4912 / (4912 + 8320))
=0.31593609 / 0.37122128
=0.8511

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)
=(33609 / 88074) / (31850 / 86974)
=0.38159956 / 0.36620139
=1.042

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)
=((256468 + 0) / 1951564) / ((227888 + 0) / 1849182)
=0.13141665 / 0.12323719
=1.0664

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
=(21933 - 0 - 7446) / 1951564
=0.0074

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.

Wells Fargo & Co has a M-score of -2.48 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.

Wells Fargo & Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI
GMI
AQI
SGI
DEPI
SGAI
LVGI
TATA
M-score

Wells Fargo & Co Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.25891100.94761111.15341
GMI 1111111111
AQI 1.00081.00081.00061.00031.00031.00051.00071.00071.00061.0003
SGI 1.00681.02231.02921.02811.02031.02321.03011.02741.02571.0126
DEPI 1.18411.07011.02420.93590.81480.74380.74710.72150.73390.8511
SGAI 0.9860.99831.00341.0111.0050.99220.98841.00531.01831.042
LVGI 1.08561.06340.9950.93821.02381.16841.23591.24031.1841.0664
TATA 0.00330.00330.00240.00020.00450.00240.00560.01640.01130.0074
M-score -2.22-2.46-2.44-3.36-2.52-2.53-2.53-2.49-2.36-2.48
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