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ITT Corp (NYSE:ITT)
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.

ITT Corp has a M-score of -2.53 suggests that the company is not a manipulator.

ITT' s 10-Year Beneish M-Score Range
Min: -3.69   Max: 1.6
Current: -2.53

-3.69
1.6

During the past 13 years, the highest Beneish M-Score of ITT Corp was 1.60. The lowest was -3.69. 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 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 * 0.9667+0.528 * 0.9814+0.404 * 0.9693+0.892 * 1.0632+0.115 * 1.0208
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9468+4.679 * -0.0161-0.327 * 0.9574
=-2.53

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

This Year (Dec14) TTM:Last Year (Dec13) TTM:
Accounts Receivable was $477 Mil.
Revenue was 660 + 657.1 + 663 + 674.5 = $2,655 Mil.
Gross Profit was 216.9 + 219.9 + 214.8 + 214.8 = $866 Mil.
Total Current Assets was $1,636 Mil.
Total Assets was $3,632 Mil.
Property, Plant and Equipment(Net PPE) was $444 Mil.
Depreciation, Depletion and Amortization(DDA) was $88 Mil.
Selling, General & Admin. Expense(SGA) was $520 Mil.
Total Current Liabilities was $775 Mil.
Long-Term Debt was $7 Mil.
Net Income was 33.7 + 80.3 + 38.3 + 32.2 = $185 Mil.
Non Operating Income was 1.7 + -1.4 + 0 + -2.2 = $-2 Mil.
Cash Flow from Operations was 112.8 + 52.1 + 93.4 + -13.6 = $245 Mil.
Accounts Receivable was $464 Mil.
Revenue was 645.5 + 634 + 609.2 + 608.2 = $2,497 Mil.
Gross Profit was 208.6 + 202.9 + 197.8 + 190.5 = $800 Mil.
Total Current Assets was $1,666 Mil.
Total Assets was $3,740 Mil.
Property, Plant and Equipment(Net PPE) was $426 Mil.
Depreciation, Depletion and Amortization(DDA) was $87 Mil.
Selling, General & Admin. Expense(SGA) was $516 Mil.
Total Current Liabilities was $833 Mil.
Long-Term Debt was $9 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)
=(476.8 / 2654.6) / (463.9 / 2496.9)
=0.17961275 / 0.18579038
=0.9667

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)
=(219.9 / 2496.9) / (216.9 / 2654.6)
=0.32031719 / 0.32637686
=0.9814

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 - (1636.2 + 443.9) / 3631.5) / (1 - (1665.5 + 426.2) / 3740.2)
=0.42720639 / 0.44075183
=0.9693

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
=2654.6 / 2496.9
=1.0632

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))
=(86.9 / (86.9 + 426.2)) / (88.3 / (88.3 + 443.9))
=0.1693627 / 0.16591507
=1.0208

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)
=(519.5 / 2654.6) / (516.1 / 2496.9)
=0.19569803 / 0.2066963
=0.9468

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)
=((7 + 775.4) / 3631.5) / ((9.1 + 832.6) / 3740.2)
=0.21544816 / 0.22504144
=0.9574

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
=(184.5 - -1.9 - 244.7) / 3631.5
=-0.0161

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 -2.53 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 own currency.

ITT Corp Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
DSRI 0.91350.97041.30190.78020.97996.25710.15971.10241.02630.9667
GMI 1.00050.99690.9831.02480.98260.8871.03281.01290.95320.9814
AQI 0.89350.91231.11241.05930.99481.06830.78681.00521.01350.9693
SGI 1.18031.1091.15311.29890.91270.17711.10311.06821.12081.0632
DEPI 0.82050.97011.19020.72711.01354.26690.27861.13430.94511.0208
SGAI 0.94571.02750.99020.98821.13982.28341.03310.47021.10930.9468
LVGI 1.06850.95881.21260.83490.84890.90450.69261.0420.94620.9574
TATA -0.0124-0.0361-0.0023-0.0289-0.0544-0.0322-0.1007-0.03440.0705-0.0158
M-score -2.53-2.61-2.09-2.49-2.821.63-3.69-2.38-2.04-2.52

ITT Corp Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
DSRI 0.18431.10230.97681.01881.08911.02631.10541.07270.98760.9667
GMI 1.05621.01280.98790.96130.95150.95320.96070.97650.97790.9814
AQI 0.70021.00522.18711.01161.17611.01351.01310.99670.93170.9693
SGI 1.14121.06821.06951.09081.11491.12081.13021.12841.09741.0632
DEPI 0.29151.13430.31670.95090.93650.94511.10831.14931.1341.0208
SGAI 0.86760.45560.50840.54190.57051.1441.11651.05321.05210.9468
LVGI 0.67851.0471.01261.00441.01590.94620.88230.88120.96830.9574
TATA -0.117-0.0335-0.019-0.01370.09070.06930.07090.0696-0.0264-0.0161
M-score -3.70-2.38-2.05-2.39-1.76-2.06-1.92-1.94-2.55-2.53
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