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ITT Corp (NYSE:ITT)
Beneish M-Score
-2.55 (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.

ITT Corp has a M-score of -2.55 suggests that the company is not a manipulator.

ITT' s 10-Year Beneish M-Score Range
Min: -3.85   Max: 4.28
Current: -2.55

-3.85
4.28

During the past 13 years, the highest Beneish M-Score of ITT Corp was 4.28. The lowest was -3.85. And the median was -2.41.


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 ITT 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 * 0.9876+0.528 * 0.9779+0.404 * 0.9317+0.892 * 1.0974+0.115 * 1.134
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0521+4.679 * -0.0264-0.327 * 0.9683
=-2.55

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

This Year (Sep14) TTM:Last Year (Sep13) TTM:
Accounts Receivable was $538 Mil.
Revenue was 657.1 + 663 + 674.5 + 645.5 = $2,640 Mil.
Gross Profit was 219.9 + 214.8 + 214.8 + 208.6 = $858 Mil.
Total Current Assets was $1,710 Mil.
Total Assets was $3,707 Mil.
Property, Plant and Equipment(Net PPE) was $433 Mil.
Depreciation, Depletion and Amortization(DDA) was $85 Mil.
Selling, General & Admin. Expense(SGA) was $527 Mil.
Total Current Liabilities was $815 Mil.
Long-Term Debt was $0 Mil.
Net Income was 80.3 + 38.3 + 32.2 + 11.2 = $162 Mil.
Non Operating Income was -1.4 + 0 + -2.2 + 3.4 = $-0 Mil.
Cash Flow from Operations was 52.1 + 93.4 + -13.6 + 128 = $260 Mil.
Accounts Receivable was $497 Mil.
Revenue was 634 + 609.2 + 608.2 + 554.3 = $2,406 Mil.
Gross Profit was 202.9 + 197.8 + 190.5 + 173.4 = $765 Mil.
Total Current Assets was $1,692 Mil.
Total Assets was $3,795 Mil.
Property, Plant and Equipment(Net PPE) was $385 Mil.
Depreciation, Depletion and Amortization(DDA) was $88 Mil.
Selling, General & Admin. Expense(SGA) was $457 Mil.
Total Current Liabilities was $862 Mil.
Long-Term Debt was $0 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)
=(538.1 / 2640.1) / (496.5 / 2405.7)
=0.20381804 / 0.20638484
=0.9876

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)
=(214.8 / 2405.7) / (219.9 / 2640.1)
=0.31782849 / 0.32502557
=0.9779

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 - (1709.6 + 433.2) / 3706.7) / (1 - (1691.5 + 385.2) / 3795.3)
=0.42191167 / 0.45282323
=0.9317

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
=2640.1 / 2405.7
=1.0974

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))
=(87.6 / (87.6 + 385.2)) / (84.6 / (84.6 + 433.2))
=0.18527919 / 0.16338355
=1.134

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)
=(527.3 / 2640.1) / (456.7 / 2405.7)
=0.19972728 / 0.18984079
=1.0521

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)
=((0 + 815.3) / 3706.7) / ((0 + 862.1) / 3795.3)
=0.21995306 / 0.22714937
=0.9683

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
=(162 - -0.2 - 259.9) / 3706.7
=-0.0264

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.

ITT Corp has a M-score of -2.55 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.

ITT Corp Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.98660.91350.97041.30190.78020.97996.25710.15971.10241.0263
GMI 0.99051.00050.99690.9831.02480.98260.8871.03281.01290.9532
AQI 1.08820.89350.91231.11241.05930.99481.06830.78681.00521.0135
SGI 1.15531.18031.1091.15311.29890.91270.17711.10311.06821.1208
DEPI 1.02040.82050.97011.19020.72711.01354.26690.27861.13430.9451
SGAI 1.01480.94571.02750.99020.98821.13982.28341.03310.47021.1093
LVGI 1.14421.06850.95881.21260.83490.84890.90450.69261.0420.936
TATA -0.0115-0.0124-0.0361-0.0023-0.0289-0.0544-0.0322-0.1007-0.03440.0705
M-score -2.42-2.53-2.61-2.09-2.49-2.821.63-3.69-2.38-2.04

ITT Corp Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
DSRI 0.1860.18431.10230.97681.01881.08911.02631.10541.07270.9876
GMI 1.05861.05621.01280.98790.96130.95150.95320.96070.97650.9779
AQI 0.76270.70021.00522.18711.01161.17611.01351.01310.99670.9317
SGI 1.12451.14121.06821.06951.09081.11491.12081.13021.12841.0974
DEPI 0.28890.29151.13430.31670.95090.93650.94511.10831.14931.134
SGAI 0.9250.86760.45560.50840.54190.57051.1441.11651.05321.0521
LVGI 0.75530.67851.0471.01261.00441.01590.9360.88230.88120.9683
TATA -0.1447-0.117-0.0335-0.019-0.01370.09070.06930.07090.0696-0.0264
M-score -3.85-3.70-2.38-2.05-2.39-1.76-2.05-1.92-1.94-2.55
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