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GuruFocus has detected 3 Warning Signs with Esterline Technologies Corp $ESL.
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Esterline Technologies Corp (NYSE:ESL)
Beneish M-Score
-2.53 (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 -2.53 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: -2.53

-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 -2.48.


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 * 0.9371+0.528 * 0.9893+0.404 * 0.96+0.892 * 1.1352+0.115 * 0.9597
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0067+4.679 * -0.0202-0.327 * 0.9635
=-2.53

* 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 $364 Mil.
Revenue was 457.733 + 543.752 + 517.092 + 490.31 = $2,009 Mil.
Gross Profit was 144.047 + 193.769 + 173.584 + 156.173 = $668 Mil.
Total Current Assets was $1,140 Mil.
Total Assets was $2,928 Mil.
Property, Plant and Equipment(Net PPE) was $331 Mil.
Depreciation, Depletion and Amortization(DDA) was $102 Mil.
Selling, General & Admin. Expense(SGA) was $397 Mil.
Total Current Liabilities was $367 Mil.
Long-Term Debt was $821 Mil.
Net Income was 16.189 + 52.272 + 29.356 + 14.973 = $113 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 45.535 + 48.546 + 38.728 + 39.232 = $172 Mil.
Accounts Receivable was $342 Mil.
Revenue was 441.477 + 331.808 + 496.217 + 500.08 = $1,770 Mil.
Gross Profit was 137.719 + 110.596 + 169.796 + 163.651 = $582 Mil.
Total Current Assets was $1,099 Mil.
Total Assets was $2,919 Mil.
Property, Plant and Equipment(Net PPE) was $308 Mil.
Depreciation, Depletion and Amortization(DDA) was $90 Mil.
Selling, General & Admin. Expense(SGA) was $347 Mil.
Total Current Liabilities was $399 Mil.
Long-Term Debt was $831 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)
=(363.825 / 2008.887) / (342.008 / 1769.582)
=0.18110775 / 0.1932705
=0.9371

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)
=(581.762 / 1769.582) / (667.573 / 2008.887)
=0.32875673 / 0.33230988
=0.9893

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 - (1140.408 + 330.565) / 2927.8) / (1 - (1098.528 + 307.586) / 2919.322)
=0.49758419 / 0.51834227
=0.96

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
=2008.887 / 1769.582
=1.1352

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))
=(89.713 / (89.713 + 307.586)) / (101.712 / (101.712 + 330.565))
=0.22580726 / 0.23529357
=0.9597

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)
=(396.816 / 2008.887) / (347.216 / 1769.582)
=0.19753027 / 0.19621357
=1.0067

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)
=((821.441 + 367.199) / 2927.8) / ((831.358 + 398.737) / 2919.322)
=0.40598402 / 0.42136325
=0.9635

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
=(112.79 - 0 - 172.041) / 2927.8
=-0.0202

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 -2.53 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

Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Sep15Sep16
DSRI 1.04240.92380.95981.05221.06270.94840.9950.91181.15860.9872
GMI 1.00890.93491.02650.95250.98510.95090.96761.0621.05771.0009
AQI 1.0610.91311.1080.88221.21990.97480.970.96780.97740.9598
SGI 1.31141.22880.9491.08471.12541.0931.00581.0860.86511.123
DEPI 0.98310.83431.14631.02461.11580.80471.00090.87051.17690.99
SGAI 1.00210.97451.03711.01121.04641.05351.04080.91481.10051.015
LVGI 1.00450.98180.95351.0141.19320.89850.86230.96631.33410.9714
TATA -0.0139-0.0001-0.0159-0.0142-0.0173-0.0253-0.0261-0.0355-0.0244-0.0216
M-score -2.20-2.42-2.55-2.50-2.37-2.60-2.59-2.62-2.65-2.49

Esterline Technologies Corp Quarterly Data

Oct14Jan15Apr15Jul15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.91180.99461.04431.0151.15861.13551.10571.17760.98720.9371
GMI 1.0621.07941.08851.07621.05771.05131.0411.04041.00090.9893
AQI 0.96780.92510.97950.98190.97741.01380.97270.95710.95980.96
SGI 1.0861.04951.03771.01760.86510.87970.87960.89451.1231.1352
DEPI 0.87050.88170.9270.91531.17691.19011.20211.22670.990.9597
SGAI 0.91480.98391.03661.10661.10051.07031.05081.0391.0151.0067
LVGI 0.96631.15251.2621.39061.33411.11871.07730.99650.97140.9635
TATA -0.0355-0.0293-0.0388-0.0429-0.0244-0.0383-0.0351-0.0317-0.0216-0.0202
M-score -2.62-2.63-2.65-2.77-2.65-2.64-2.65-2.53-2.49-2.53
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