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GuruFocus has detected 7 Warning Signs with Weight Watchers International Inc $WTW.
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Weight Watchers International Inc (NYSE:WTW)
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.

Weight Watchers International Inc has a M-score of -2.51 suggests that the company is not a manipulator.

WTW' s Beneish M-Score Range Over the Past 10 Years
Min: -3.27   Max: -1.89
Current: -2.51

-3.27
-1.89

During the past 13 years, the highest Beneish M-Score of Weight Watchers International Inc was -1.89. The lowest was -3.27. And the median was -2.84.


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 Weight Watchers International 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 * 1.0304+0.528 * 0.9753+0.404 * 0.9846+0.892 * 1.0329+0.115 * 0.9252
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.919+4.679 * -0.0205-0.327 * 0.9383
=-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 $29 Mil.
Revenue was 329.063 + 267.412 + 280.819 + 309.761 = $1,187 Mil.
Gross Profit was 164.097 + 130.477 + 144.303 + 161.048 = $600 Mil.
Total Current Assets was $267 Mil.
Total Assets was $1,301 Mil.
Property, Plant and Equipment(Net PPE) was $48 Mil.
Depreciation, Depletion and Amortization(DDA) was $53 Mil.
Selling, General & Admin. Expense(SGA) was $382 Mil.
Total Current Liabilities was $300 Mil.
Long-Term Debt was $1,978 Mil.
Net Income was 10.653 + 13.299 + 34.658 + 30.494 = $89 Mil.
Non Operating Income was -0.64 + -1.127 + 0.146 + -0.607 = $-2 Mil.
Cash Flow from Operations was 42.339 + 25.127 + 47.551 + 3.033 = $118 Mil.
Accounts Receivable was $28 Mil.
Revenue was 306.91 + 259.238 + 273.324 + 309.754 = $1,149 Mil.
Gross Profit was 149.673 + 120.798 + 136.622 + 159.364 = $566 Mil.
Total Current Assets was $241 Mil.
Total Assets was $1,290 Mil.
Property, Plant and Equipment(Net PPE) was $55 Mil.
Depreciation, Depletion and Amortization(DDA) was $52 Mil.
Selling, General & Admin. Expense(SGA) was $403 Mil.
Total Current Liabilities was $415 Mil.
Long-Term Debt was $1,993 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)
=(29.468 / 1187.055) / (27.688 / 1149.226)
=0.02482446 / 0.02409274
=1.0304

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)
=(566.457 / 1149.226) / (599.925 / 1187.055)
=0.49290305 / 0.50538939
=0.9753

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 - (266.658 + 47.688) / 1301.024) / (1 - (241.238 + 55.243) / 1290.483)
=0.7583857 / 0.77025579
=0.9846

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
=1187.055 / 1149.226
=1.0329

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))
=(52.107 / (52.107 + 55.243)) / (52.626 / (52.626 + 47.688))
=0.48539357 / 0.52461272
=0.9252

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)
=(382.439 / 1187.055) / (402.886 / 1149.226)
=0.32217463 / 0.3505716
=0.919

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)
=((1977.505 + 299.918) / 1301.024) / ((1992.664 + 414.89) / 1290.483)
=1.750485 / 1.86562241
=0.9383

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
=(89.104 - -2.228 - 118.05) / 1301.024
=-0.0205

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.

Weight Watchers International 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.

Weight Watchers International Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.89811.0351.02721.16440.9394
GMI 0.97141.02411.07071.09990.9809
AQI 0.98720.93610.94461.04781.0988
SGI 1.00380.93730.85840.78681.0004
DEPI 00.95210.89320.83230.9272
SGAI 1.1340.99431.0791.02540.9471
LVGI 1.77440.85550.91791.01560.9979
TATA -0.0623-0.0701-0.079-0.0224-0.0392
M-score -3.27-2.80-2.93-2.58-2.69

Weight Watchers International Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.02720.91040.91871.0941.16441.07491.14910.96830.93941.0304
GMI 1.07071.08181.09431.09861.09991.07361.03941.00940.98090.9753
AQI 0.94461.02361.11361.0831.04781.08261.03321.08821.09880.9846
SGI 0.85840.84780.83150.81220.78680.82520.88070.93811.00041.0329
DEPI 0.89320.87960.8580.86230.83230.86040.89950.92810.92720.9252
SGAI 1.0791.03831.04421.03771.02541.03731.0171.01560.94710.919
LVGI 0.91790.98511.03721.04461.01561.02091.00071.00010.99790.9383
TATA -0.079-0.0372-0.0419-0.0174-0.0224-0.0645-0.0339-0.0409-0.0392-0.0205
M-score -2.93-2.84-2.84-2.59-2.58-2.83-2.59-2.73-2.69-2.51
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