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GuruFocus has detected 6 Warning Signs with Esterline Technologies Corp $ESL.
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Esterline Technologies Corp (NYSE:ESL)
Beneish M-Score
-2.49 (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.

Esterline Technologies Corp has a M-score of -2.49 suggests that the company is not a manipulator.

ESL' s Beneish M-Score Range Over the Past 10 Years
Min: -2.84   Max: -1.86
Current: -2.49

-2.84
-1.86

During the past 13 years, the highest Beneish M-Score of Esterline Technologies Corp was -1.86. The lowest was -2.84. And the median was -2.49.


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 Esterline Technologies 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 * 0.9872+0.528 * 1.0009+0.404 * 0.9598+0.892 * 1.123+0.115 * 0.99
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.015+4.679 * -0.0216-0.327 * 0.9714
=-2.49

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

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $422 Mil.
Revenue was 543.752 + 517.092 + 490.31 + 441.477 = $1,993 Mil.
Gross Profit was 193.769 + 173.584 + 156.173 + 137.719 = $661 Mil.
Total Current Assets was $1,176 Mil.
Total Assets was $3,032 Mil.
Property, Plant and Equipment(Net PPE) was $338 Mil.
Depreciation, Depletion and Amortization(DDA) was $100 Mil.
Selling, General & Admin. Expense(SGA) was $395 Mil.
Total Current Liabilities was $398 Mil.
Long-Term Debt was $854 Mil.
Net Income was 52.272 + 29.356 + 14.973 + 5.084 = $102 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 48.546 + 38.728 + 39.232 + 40.652 = $167 Mil.
Accounts Receivable was $381 Mil.
Revenue was 331.808 + 496.217 + 500.08 + 446.344 = $1,774 Mil.
Gross Profit was 110.596 + 169.796 + 163.651 + 145.35 = $589 Mil.
Total Current Assets was $1,129 Mil.
Total Assets was $3,007 Mil.
Property, Plant and Equipment(Net PPE) was $309 Mil.
Depreciation, Depletion and Amortization(DDA) was $91 Mil.
Selling, General & Admin. Expense(SGA) was $347 Mil.
Total Current Liabilities was $411 Mil.
Long-Term Debt was $868 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)
=(422.073 / 1992.631) / (380.748 / 1774.449)
=0.21181694 / 0.21457252
=0.9872

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)
=(589.393 / 1774.449) / (661.245 / 1992.631)
=0.3321555 / 0.33184518
=1.0009

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 - (1175.788 + 338.034) / 3032.031) / (1 - (1128.814 + 309.399) / 3007.03)
=0.50072344 / 0.52171644
=0.9598

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
=1992.631 / 1774.449
=1.123

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))
=(90.575 / (90.575 + 309.399)) / (100.258 / (100.258 + 338.034))
=0.22645222 / 0.22874705
=0.99

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)
=(395.274 / 1992.631) / (346.781 / 1774.449)
=0.19836789 / 0.19543024
=1.015

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)
=((853.796 + 398.498) / 3032.031) / ((867.786 + 410.809) / 3007.03)
=0.4130215 / 0.42520194
=0.9714

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
=(101.685 - 0 - 167.158) / 3032.031
=-0.0216

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.

Esterline Technologies Corp has a M-score of -2.49 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.

Esterline Technologies Corp Annual Data

Oct07Oct08Oct09Oct10Oct11Oct12Oct13Sep14Sep15Sep16
DSRI 1.04240.92380.95981.05221.06270.94840.995
GMI 1.00890.93491.02650.95250.98510.95090.9676
AQI 1.0610.91311.1080.88221.21990.97480.97
SGI 1.31141.22880.9491.08471.12541.0931.0058
DEPI 0.98310.83431.14631.02461.11580.80471.0009
SGAI 1.00210.97451.03711.01121.04641.05351.0408
LVGI 1.00450.98180.95351.0141.19320.89850.8623
TATA -0.0139-0.0001-0.0159-0.0142-0.0173-0.0253-0.0261
M-score -2.20-2.42-2.55-2.50-2.37-2.60-2.59

Esterline Technologies Corp Quarterly Data

Sep14Oct14Jan15Apr15Jul15Sep15Dec15Mar16Jun16Sep16
DSRI 1.06130.91761.02921.18141.14421.11680.9872
GMI 1.0581.06521.06431.06161.05591.04671.0009
AQI 0.96580.9340.99010.97741.01380.97270.9598
SGI 1.09121.05141.0330.84840.8730.87081.123
DEPI 0.89510.89620.90861.1691.18181.20560.99
SGAI 0.93980.99711.08771.1161.08111.0551.015
LVGI 0.97531.20731.29121.33411.11871.07730.9714
TATA -0.056-0.0577-0.0622-0.0244-0.0383-0.0351-0.0216
M-score -2.58-2.85-2.81-2.65-2.64-2.65-2.49
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