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GuruFocus has detected 4 Warning Signs with ITT Corp $ITT.
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ITT Corp (NYSE:ITT)
Beneish M-Score
-2.59 (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 -2.59 suggests that the company is not a manipulator.

ITT' s Beneish M-Score Range Over the Past 10 Years
Min: -3.07   Max: 1.65
Current: -2.59

-3.07
1.65

During the past 13 years, the highest Beneish M-Score of ITT Corp was 1.65. The lowest was -3.07. 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 * 0.9578+0.528 * 1.0327+0.404 * 1.0066+0.892 * 0.9677+0.115 * 0.9369
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0394+4.679 * -0.0152-0.327 * 0.9396
=-2.59

* 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 $514 Mil.
Revenue was 588.4 + 581.7 + 626.2 + 609.1 = $2,405 Mil.
Gross Profit was 173.4 + 183.9 + 205.6 + 195.3 = $758 Mil.
Total Current Assets was $1,402 Mil.
Total Assets was $3,602 Mil.
Property, Plant and Equipment(Net PPE) was $465 Mil.
Depreciation, Depletion and Amortization(DDA) was $102 Mil.
Selling, General & Admin. Expense(SGA) was $444 Mil.
Total Current Liabilities was $866 Mil.
Long-Term Debt was $0 Mil.
Net Income was 25.8 + 90.1 + 32.8 + 37.4 = $186 Mil.
Non Operating Income was -1 + 0 + 1 + 0 = $0 Mil.
Cash Flow from Operations was 94 + 75.1 + 65.9 + 5.7 = $241 Mil.
Accounts Receivable was $554 Mil.
Revenue was 666.8 + 601.9 + 628.2 + 588.7 = $2,486 Mil.
Gross Profit was 201.3 + 194.9 + 213.9 + 199 = $809 Mil.
Total Current Assets was $1,498 Mil.
Total Assets was $3,724 Mil.
Property, Plant and Equipment(Net PPE) was $444 Mil.
Depreciation, Depletion and Amortization(DDA) was $90 Mil.
Selling, General & Admin. Expense(SGA) was $442 Mil.
Total Current Liabilities was $953 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)
=(513.5 / 2405.4) / (554 / 2485.6)
=0.21347801 / 0.22288381
=0.9578

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)
=(809.1 / 2485.6) / (758.2 / 2405.4)
=0.32551497 / 0.31520745
=1.0327

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 - (1401.8 + 464.5) / 3601.7) / (1 - (1497.7 + 443.5) / 3723.6)
=0.48182803 / 0.47867655
=1.0066

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
=2405.4 / 2485.6
=0.9677

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 / (90 + 443.5)) / (102 / (102 + 464.5))
=0.16869728 / 0.18005296
=0.9369

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)
=(444.1 / 2405.4) / (441.5 / 2485.6)
=0.18462626 / 0.17762311
=1.0394

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 + 866.2) / 3601.7) / ((0 + 953.1) / 3723.6)
=0.24049754 / 0.25596197
=0.9396

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
=(186.1 - 0 - 240.7) / 3601.7
=-0.0152

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 -2.59 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.

ITT Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.30190.78020.97996.25710.15971.10241.02630.96671.24090.9578
GMI 0.9831.02480.98260.8871.03281.01290.95320.98141.00261.0327
AQI 1.11241.05930.99481.06830.78681.00521.01350.96931.12051.0066
SGI 1.15311.29890.91270.17711.10311.06821.12081.06320.93630.9677
DEPI 1.19020.72711.01354.26690.27861.13430.94511.02080.98350.9369
SGAI 0.99020.98821.13982.28340.90750.53531.10930.94680.90761.0394
LVGI 1.21260.83490.84890.90450.68931.0470.94620.94881.19880.9396
TATA -0.0023-0.0289-0.0544-0.03220.0522-0.03440.0717-0.01420.0316-0.0149
M-score -2.09-2.49-2.821.63-2.95-2.40-2.04-2.51-2.17-2.59

ITT Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.98760.96670.89811.01691.06011.24091.17221.12981.05440.9578
GMI 0.97790.98140.9710.95850.97691.00261.03031.05341.05121.0327
AQI 0.93170.96930.98131.0061.01721.12051.11461.11881.09781.0066
SGI 1.09741.06321.00220.96830.93890.93630.97560.98821.0020.9677
DEPI 1.1341.02080.930.92730.93980.98350.98490.93530.93090.9369
SGAI 1.05210.94680.9330.94210.93740.90760.92650.94440.95991.0394
LVGI 0.96830.94881.05961.03590.93741.19881.07221.07061.22490.9396
TATA -0.0255-0.0148-0.01820.01530.02690.03180.03050.0054-0.0101-0.0152
M-score -2.55-2.52-2.70-2.45-2.33-2.17-2.15-2.29-2.48-2.59
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