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GuruFocus has detected 2 Warning Signs with The Estee Lauder Companies Inc $EL.
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The Estee Lauder Companies Inc (NYSE:EL)
Beneish M-Score
-2.54 (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 Estee Lauder Companies Inc has a M-score of -2.54 suggests that the company is not a manipulator.

EL' s Beneish M-Score Range Over the Past 10 Years
Min: -3.23   Max: -2.04
Current: -2.54

-3.23
-2.04

During the past 13 years, the highest Beneish M-Score of The Estee Lauder Companies Inc was -2.04. The lowest was -3.23. And the median was -2.64.


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 Estee Lauder Companies 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 * 1.0397+0.528 * 1.0033+0.404 * 1.4256+0.892 * 1.0282+0.115 * 1.0005
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0008+4.679 * -0.0508-0.327 * 1.189
=-2.54

* 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 $1,508 Mil.
Revenue was 3208 + 2865 + 2646.3 + 2656.5 = $11,376 Mil.
Gross Profit was 2571 + 2269 + 2135.6 + 2152.3 = $9,128 Mil.
Total Current Assets was $4,789 Mil.
Total Assets was $11,212 Mil.
Property, Plant and Equipment(Net PPE) was $1,563 Mil.
Depreciation, Depletion and Amortization(DDA) was $431 Mil.
Selling, General & Admin. Expense(SGA) was $7,388 Mil.
Total Current Liabilities was $4,458 Mil.
Long-Term Debt was $1,890 Mil.
Net Income was 428 + 294 + 93.5 + 265.6 = $1,081 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 974 + -150 + 472.5 + 354.2 = $1,651 Mil.
Accounts Receivable was $1,411 Mil.
Revenue was 3124 + 2835 + 2524.4 + 2580.5 = $11,064 Mil.
Gross Profit was 2535 + 2258 + 2036.4 + 2077.6 = $8,907 Mil.
Total Current Assets was $4,476 Mil.
Total Assets was $8,582 Mil.
Property, Plant and Equipment(Net PPE) was $1,497 Mil.
Depreciation, Depletion and Amortization(DDA) was $413 Mil.
Selling, General & Admin. Expense(SGA) was $7,180 Mil.
Total Current Liabilities was $2,479 Mil.
Long-Term Debt was $1,607 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)
=(1508 / 11375.8) / (1410.6 / 11063.9)
=0.13256211 / 0.12749573
=1.0397

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)
=(8907 / 11063.9) / (9127.9 / 11375.8)
=0.80505066 / 0.80239631
=1.0033

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 - (4789 + 1563) / 11212) / (1 - (4475.8 + 1496.8) / 8582.1)
=0.43346415 / 0.30406311
=1.4256

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
=11375.8 / 11063.9
=1.0282

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))
=(412.7 / (412.7 + 1496.8)) / (430.7 / (430.7 + 1563))
=0.21612988 / 0.2160305
=1.0005

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)
=(7387.6 / 11375.8) / (7179.5 / 11063.9)
=0.64941367 / 0.64891223
=1.0008

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)
=((1890 + 4458) / 11212) / ((1607.3 + 2479.4) / 8582.1)
=0.56617909 / 0.47618881
=1.189

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
=(1081.1 - 0 - 1650.7) / 11212
=-0.0508

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 Estee Lauder Companies Inc has a M-score of -2.54 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 Estee Lauder Companies Inc Annual Data

Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15Jun16
DSRI 1.02481.07390.88730.82151.12131.0171.05431.09270.86641.0255
GMI 0.98831.00031.00610.97090.9810.98190.99190.99720.99760.9985
AQI 1.0860.96691.01440.93381.03130.99230.91730.93451.58471.1931
SGI 1.08881.12410.92581.06441.13011.10261.04821.07730.98281.0447
DEPI 1.08930.98280.9770.96821.00021.05760.970.97960.94581.0382
SGAI 1.01931.00341.03660.97470.99481.0070.99510.9831.03020.993
LVGI 1.24030.90420.99220.94650.92581.00560.94170.94171.05361.0992
TATA -0.0515-0.0432-0.0923-0.0897-0.052-0.0425-0.0321-0.0421-0.1039-0.0731
M-score -2.66-2.49-3.08-3.03-2.47-2.58-2.56-2.53-2.90-2.71

The Estee Lauder Companies Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.90460.88460.93610.86641.01910.9981.03421.02561.02641.0397
GMI 0.99980.99860.99790.99760.99760.99920.99790.99850.99991.0033
AQI 0.96091.31071.40981.58471.5691.19661.23641.19311.1831.4256
SGI 1.05991.05371.0310.98281.00551.01031.01441.04471.0281.0282
DEPI 0.94450.9520.91530.94580.99271.00661.03731.03821.02191.0005
SGAI 0.98580.98680.98921.03021.00590.99991.01010.99291.00341.0008
LVGI 0.9660.99890.9581.05361.13461.11181.08791.09921.02391.189
TATA -0.0654-0.0779-0.0688-0.1039-0.0776-0.0851-0.0794-0.073-0.0568-0.0508
M-score -2.83-2.78-2.66-2.90-2.64-2.83-2.74-2.71-2.63-2.54
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