Switch to:
GuruFocus has detected 6 Warning Signs with Cummins Inc $CMI.
More than 500,000 people have already joined GuruFocus to track the stocks they follow and exchange investment ideas.
Cummins Inc (NYSE:CMI)
Beneish M-Score
-2.61 (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.

Cummins Inc has a M-score of -2.61 suggests that the company is not a manipulator.

CMI' s Beneish M-Score Range Over the Past 10 Years
Min: -3.06   Max: -2.24
Current: -2.61

-3.06
-2.24

During the past 13 years, the highest Beneish M-Score of Cummins Inc was -2.24. The lowest was -3.06. And the median was -2.53.


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 Cummins 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 * 1.1708+0.528 * 1.0181+0.404 * 1.0264+0.892 * 0.9162+0.115 * 0.986
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0674+4.679 * -0.0392-0.327 * 1.1045
=-2.61

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

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $3,025 Mil.
Revenue was 4503 + 4187 + 4528 + 4291 = $17,509 Mil.
Gross Profit was 1120 + 1079 + 1197 + 1056 = $4,452 Mil.
Total Current Assets was $7,707 Mil.
Total Assets was $15,011 Mil.
Property, Plant and Equipment(Net PPE) was $3,800 Mil.
Depreciation, Depletion and Amortization(DDA) was $530 Mil.
Selling, General & Admin. Expense(SGA) was $2,046 Mil.
Total Current Liabilities was $4,325 Mil.
Long-Term Debt was $1,568 Mil.
Net Income was 378 + 289 + 406 + 321 = $1,394 Mil.
Non Operating Income was 14 + 8 + 18 + 8 = $48 Mil.
Cash Flow from Operations was 625 + 576 + 471 + 263 = $1,935 Mil.
Accounts Receivable was $2,820 Mil.
Revenue was 4766 + 4620 + 5015 + 4709 = $19,110 Mil.
Gross Profit was 1212 + 1208 + 1332 + 1195 = $4,947 Mil.
Total Current Assets was $7,947 Mil.
Total Assets was $15,134 Mil.
Property, Plant and Equipment(Net PPE) was $3,745 Mil.
Depreciation, Depletion and Amortization(DDA) was $514 Mil.
Selling, General & Admin. Expense(SGA) was $2,092 Mil.
Total Current Liabilities was $3,803 Mil.
Long-Term Debt was $1,576 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)
=(3025 / 17509) / (2820 / 19110)
=0.17276829 / 0.14756672
=1.1708

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)
=(4947 / 19110) / (4452 / 17509)
=0.2588697 / 0.25426923
=1.0181

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 - (7707 + 3800) / 15011) / (1 - (7947 + 3745) / 15134)
=0.23342882 / 0.22743491
=1.0264

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
=17509 / 19110
=0.9162

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))
=(514 / (514 + 3745)) / (530 / (530 + 3800))
=0.12068561 / 0.12240185
=0.986

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)
=(2046 / 17509) / (2092 / 19110)
=0.11685419 / 0.10947148
=1.0674

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)
=((1568 + 4325) / 15011) / ((1576 + 3803) / 15134)
=0.39257878 / 0.35542487
=1.1045

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
=(1394 - 48 - 1935) / 15011
=-0.0392

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.

Cummins Inc has a M-score of -2.61 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.

Cummins Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.98460.70621.71580.9140.82530.92121.18751.0010.96281.1708
GMI 1.16590.95561.02070.83850.9420.99811.02980.97820.97691.0181
AQI 1.12651.08950.94760.91130.98491.07940.94050.96291.1861.0264
SGI 1.14841.09920.7531.22461.36460.96040.99811.1110.99420.9162
DEPI 1.05621.02860.98871.08741.08971.06291.02441.03960.91040.986
SGAI 0.87961.01791.13470.980.90531.02481.00691.03781.00441.0674
LVGI 0.97670.96260.90751.09610.96920.82621.121.03771.00091.1045
TATA -0.0127-0.019-0.07870-0.01930.0071-0.0433-0.046-0.0442-0.0392
M-score -2.25-2.73-2.41-2.50-2.41-2.46-2.56-2.64-2.67-2.61

Cummins Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.02581.0011.00080.98570.99470.96280.8820.95610.99451.1708
GMI 0.96850.98920.98990.96850.97950.97690.98711.00521.00791.0181
AQI 0.99640.96290.96191.01761.0241.1861.2491.20971.18861.0264
SGI 1.10081.1111.09781.08891.03820.99420.95740.92390.91450.9162
DEPI 1.0871.03960.97750.95180.92220.91040.9550.96560.96720.986
SGAI 1.0141.00791.01341.01771.03751.00441.01411.03251.03411.0674
LVGI 1.0061.03771.02271.01090.97991.00091.03731.08251.10711.1045
TATA -0.0371-0.046-0.0372-0.0297-0.0241-0.0442-0.0556-0.0659-0.0721-0.0392
M-score -2.55-2.63-2.60-2.57-2.57-2.67-2.81-2.85-2.86-2.61
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
FEEDBACK