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Esterline Technologies (NYSE:ESL)
Beneish M-Score
-2.35 (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 has a M-score of -2.35 suggests that the company is not a manipulator.

ESL' s 10-Year Beneish M-Score Range
Min: -2.89   Max: -1.87
Current: -2.35

-2.89
-1.87

During the past 13 years, the highest Beneish M-Score of Esterline Technologies was -1.87. The lowest was -2.89. And the median was -2.42.


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 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 * 1.0203+0.528 * 1.0412+0.404 * 0.9708+0.892 * 1.0679+0.115 * 1.0329
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.904+4.679 * -0.0051-0.327 * 0.8678
=-2.35

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Jul14) TTM:Last Year (Jul13) TTM:
Accounts Receivable was $362 Mil.
Revenue was 531.124 + 529.574 + 504.98 + 534.162 = $2,100 Mil.
Gross Profit was 182.473 + 182.345 + 173.295 + 205.373 = $743 Mil.
Total Current Assets was $1,154 Mil.
Total Assets was $3,308 Mil.
Property, Plant and Equipment(Net PPE) was $363 Mil.
Depreciation, Depletion and Amortization(DDA) was $112 Mil.
Selling, General & Admin. Expense(SGA) was $382 Mil.
Total Current Liabilities was $381 Mil.
Long-Term Debt was $628 Mil.
Net Income was 38.908 + 36.904 + 30.078 + 65.863 = $172 Mil.
Non Operating Income was -0.533 + 0 + 0 + 0 = $-1 Mil.
Cash Flow from Operations was 50.263 + 34.529 + 49.923 + 54.493 = $189 Mil.
Accounts Receivable was $332 Mil.
Revenue was 478.068 + 499.562 + 457.962 + 530.656 = $1,966 Mil.
Gross Profit was 178.902 + 181.376 + 160.345 + 204.253 = $725 Mil.
Total Current Assets was $1,063 Mil.
Total Assets was $3,225 Mil.
Property, Plant and Equipment(Net PPE) was $363 Mil.
Depreciation, Depletion and Amortization(DDA) was $116 Mil.
Selling, General & Admin. Expense(SGA) was $396 Mil.
Total Current Liabilities was $401 Mil.
Long-Term Debt was $732 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)
=(361.827 / 2099.84) / (332.069 / 1966.248)
=0.1723117 / 0.1688846
=1.0203

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)
=(182.345 / 1966.248) / (182.473 / 2099.84)
=0.3686595 / 0.35406793
=1.0412

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 - (1153.594 + 363.205) / 3308.458) / (1 - (1062.835 + 363.155) / 3224.911)
=0.54153899 / 0.55782036
=0.9708

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
=2099.84 / 1966.248
=1.0679

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))
=(116.468 / (116.468 + 363.155)) / (111.634 / (111.634 + 363.205))
=0.24283239 / 0.23509863
=1.0329

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)
=(382.405 / 2099.84) / (396.082 / 1966.248)
=0.18211149 / 0.20144051
=0.904

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)
=((628.119 + 380.68) / 3308.458) / ((732.444 + 400.705) / 3224.911)
=0.30491516 / 0.35137373
=0.8678

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
=(171.753 - -0.533 - 189.208) / 3308.458
=-0.0051

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 has a M-score of -2.35 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 own currency.

Esterline Technologies Annual Data

Oct04Oct05Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13
DSRI 1.20310.85171.10011.04930.96940.94771.06561.06270.89391.0123
GMI 0.98981.02331.01331.00360.93271.02030.95820.98510.95120.9791
AQI 1.22030.83991.19951.06520.90951.1080.88221.21990.97480.97
SGI 1.11681.32991.16381.30271.1710.96111.0711.12541.15970.9887
DEPI 1.03540.86831.01320.98310.83431.14631.02461.11580.80471.0009
SGAI 0.97760.8780.9981.00730.97551.0421.00641.04641.08551.0333
LVGI 0.90270.87710.99840.99690.98930.95351.0141.19320.89850.8623
TATA -0.0254-0.0160.0122-0.0321-0.0001-0.0159-0.0142-0.0173-0.0253-0.0261
M-score -2.18-2.40-2.09-2.29-2.44-2.56-2.50-2.37-2.59-2.58

Esterline Technologies Quarterly Data

Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14Jul14
DSRI 0.99750.76130.89390.86930.90120.99371.01230.97161.00531.0203
GMI 1.05841.05870.95120.92940.9310.92230.97910.99441.00621.0412
AQI 1.13690.96280.97480.97710.99190.99150.970.97690.96290.9708
SGI 1.17561.20371.15971.08871.04581.00110.98871.01891.03681.0679
DEPI 0.92490.77810.80470.87320.92450.95491.00090.99160.99121.0329
SGAI 1.13541.10761.08551.06771.02761.05571.03330.98640.97150.904
LVGI 1.22960.94770.89850.86310.87030.84690.86230.89110.87410.8678
TATA -0.019-0.0359-0.0253-0.0368-0.0393-0.0241-0.0261-0.0133-0.0125-0.0051
M-score -2.44-2.70-2.59-2.72-2.72-2.61-2.58-2.53-2.47-2.35
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