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GuruFocus has detected 6 Warning Signs with Brady Corp $BRC.
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Brady Corp (NYSE:BRC)
Beneish M-Score
-2.66 (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.

Brady Corp has a M-score of -2.66 suggests that the company is not a manipulator.

BRC' s Beneish M-Score Range Over the Past 10 Years
Min: -3.65   Max: -1.85
Current: -2.66

-3.65
-1.85

During the past 13 years, the highest Beneish M-Score of Brady Corp was -1.85. The lowest was -3.65. And the median was -2.63.


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 Brady Corp 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 * 0.9408+0.528 * 0.9551+0.404 * 1.0293+0.892 * 0.9881+0.115 * 1.1566
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9876+4.679 * -0.0411-0.327 * 0.7807
=-2.66

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Jan17) TTM:Last Year (Jan16) TTM:
Accounts Receivable was $140 Mil.
Revenue was 268.001 + 280.176 + 282.106 + 286.816 = $1,117 Mil.
Gross Profit was 134.158 + 140.358 + 141.089 + 145.443 = $561 Mil.
Total Current Assets was $382 Mil.
Total Assets was $1,003 Mil.
Property, Plant and Equipment(Net PPE) was $97 Mil.
Depreciation, Depletion and Amortization(DDA) was $29 Mil.
Selling, General & Admin. Expense(SGA) was $397 Mil.
Total Current Liabilities was $150 Mil.
Long-Term Debt was $157 Mil.
Net Income was 25.297 + 22.553 + 25.136 + 20.981 = $94 Mil.
Non Operating Income was 0.596 + -0.489 + 0.321 + 0.721 = $1 Mil.
Cash Flow from Operations was 19.341 + 33.993 + 40.426 + 40.296 = $134 Mil.
Accounts Receivable was $151 Mil.
Revenue was 268.63 + 283.073 + 288.636 + 290.227 = $1,131 Mil.
Gross Profit was 132.892 + 139.349 + 129.069 + 140.999 = $542 Mil.
Total Current Assets was $406 Mil.
Total Assets was $1,031 Mil.
Property, Plant and Equipment(Net PPE) was $101 Mil.
Depreciation, Depletion and Amortization(DDA) was $37 Mil.
Selling, General & Admin. Expense(SGA) was $407 Mil.
Total Current Liabilities was $157 Mil.
Long-Term Debt was $248 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)
=(140.018 / 1117.099) / (150.615 / 1130.566)
=0.12534073 / 0.13322088
=0.9408

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)
=(542.309 / 1130.566) / (561.048 / 1117.099)
=0.4796792 / 0.5022366
=0.9551

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 - (381.685 + 96.884) / 1003.136) / (1 - (405.909 + 101.456) / 1031.285)
=0.5229271 / 0.50802639
=1.0293

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
=1117.099 / 1130.566
=0.9881

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))
=(36.894 / (36.894 + 101.456)) / (29.032 / (29.032 + 96.884))
=0.26667149 / 0.23056641
=1.1566

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)
=(396.931 / 1117.099) / (406.744 / 1130.566)
=0.35532303 / 0.35977024
=0.9876

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)
=((157.223 + 150.201) / 1003.136) / ((247.689 + 157.132) / 1031.285)
=0.30646293 / 0.39254037
=0.7807

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
=(93.967 - 1.149 - 134.056) / 1003.136
=-0.0411

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.

Brady Corp has a M-score of -2.66 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.

Brady Corp Annual Data

Jul07Jul08Jul09Jul10Jul11Jul12Jul13Jul14Jul15Jul16
DSRI 0.95290.98020.91791.11281.22540.86110.78710.99190.92620.9788
GMI 1.07060.98681.02260.96530.89191.00631.04791.05771.04410.9558
AQI 0.98680.95751.09810.91660.96970.99381.08670.93580.99940.9788
SGI 1.3381.11770.79361.04170.84141.01151.08051.05810.95650.9564
DEPI 0.85170.89790.98990.99291.03241.02330.88661.1430.95261.0891
SGAI 0.99070.98791.00921.05361.08380.97681.00830.99880.97741.002
LVGI 1.07210.92660.86840.46810.96412.0021.12320.9871.07110.941
TATA -0.0174-0.0531-0.0368-0.0484-0.0337-0.1024-0.2096-0.1131-0.0858-0.0557
M-score -2.31-2.65-2.82-2.45-2.64-3.40-3.58-2.94-2.99-2.80

Brady Corp Quarterly Data

Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17
DSRI 0.92350.89570.92460.92620.97611.07261.00610.97880.93820.9408
GMI 1.05471.041.03491.04411.02461.02181.00240.95580.95530.9551
AQI 0.950.95840.95760.99940.98580.96050.95130.97880.97061.0293
SGI 1.02891.00610.98440.95650.93220.92730.93940.95640.97660.9881
DEPI 1.15841.14521.09070.95260.91750.9250.91231.08911.12381.1566
SGAI 0.98780.99810.97810.97740.98990.9861.01131.0020.99510.9876
LVGI 1.0741.09051.0561.07111.01591.05061.02230.9410.9130.7807
TATA -0.1184-0.1221-0.1224-0.0858-0.0923-0.1109-0.1154-0.0557-0.0554-0.0411
M-score -3.07-3.15-3.14-2.99-3.00-3.02-3.11-2.80-2.81-2.66
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