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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
-2.48 (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 -2.48 suggests that the company is not a manipulator.

ITT' s Beneish M-Score Range Over the Past 10 Years
Min: -3.23   Max: 4.33
Current: -2.48

-3.23
4.33

During the past 13 years, the highest Beneish M-Score of ITT Corp was 4.33. The lowest was -3.23. 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 * 1.0544+0.528 * 1.0512+0.404 * 1.0978+0.892 * 1.002+0.115 * 0.9309
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9599+4.679 * -0.0101-0.327 * 1.2249
=-2.48

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $566 Mil.
Revenue was 581.7 + 626.2 + 609.1 + 666.8 = $2,484 Mil.
Gross Profit was 183.9 + 205.6 + 195.3 + 201.3 = $786 Mil.
Total Current Assets was $1,516 Mil.
Total Assets was $3,718 Mil.
Property, Plant and Equipment(Net PPE) was $450 Mil.
Depreciation, Depletion and Amortization(DDA) was $103 Mil.
Selling, General & Admin. Expense(SGA) was $446 Mil.
Total Current Liabilities was $939 Mil.
Long-Term Debt was $0 Mil.
Net Income was 90.1 + 32.8 + 37.4 + 36.7 = $197 Mil.
Non Operating Income was 0 + 1 + 0 + 4.4 = $5 Mil.
Cash Flow from Operations was 75.1 + 65.9 + 5.7 + 82.6 = $229 Mil.
Accounts Receivable was $536 Mil.
Revenue was 601.9 + 628.2 + 588.7 + 660 = $2,479 Mil.
Gross Profit was 194.9 + 213.9 + 199 + 216.9 = $825 Mil.
Total Current Assets was $1,571 Mil.
Total Assets was $3,478 Mil.
Property, Plant and Equipment(Net PPE) was $414 Mil.
Depreciation, Depletion and Amortization(DDA) was $87 Mil.
Selling, General & Admin. Expense(SGA) was $464 Mil.
Total Current Liabilities was $717 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)
=(565.9 / 2483.8) / (535.6 / 2478.8)
=0.22783638 / 0.21607229
=1.0544

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)
=(824.7 / 2478.8) / (786.1 / 2483.8)
=0.33270131 / 0.31649086
=1.0512

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 - (1515.8 + 450.3) / 3717.6) / (1 - (1571.1 + 414.4) / 3478.3)
=0.47113729 / 0.42917517
=1.0978

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
=2483.8 / 2478.8
=1.002

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))
=(87.2 / (87.2 + 414.4)) / (103.4 / (103.4 + 450.3))
=0.1738437 / 0.18674372
=0.9309

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)
=(446.4 / 2483.8) / (464.1 / 2478.8)
=0.17972462 / 0.18722769
=0.9599

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 + 938.9) / 3717.6) / ((0 + 717.2) / 3478.3)
=0.25255541 / 0.20619268
=1.2249

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
=(197 - 5.4 - 229.3) / 3717.6
=-0.0101

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 -2.48 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

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
DSRI 0.97041.30190.78020.97996.25710.15971.10241.02630.96671.2409
GMI 0.99690.9831.02480.98260.8871.03281.01290.95320.98141.0026
AQI 0.91231.11241.05930.99481.06830.78681.00521.01350.96931.1205
SGI 1.1091.15311.29890.91270.17711.10311.06821.12081.06320.9363
DEPI 0.97011.19020.72711.01354.26690.27861.13430.94511.02080.9835
SGAI 1.02750.99020.98821.13982.28340.90750.53531.10930.94680.9076
LVGI 0.95881.21260.83490.84890.90450.68931.0470.94620.94881.1988
TATA -0.0361-0.0023-0.0289-0.0544-0.03220.0522-0.03440.0717-0.01420.0316
M-score -2.61-2.09-2.49-2.821.63-2.95-2.40-2.04-2.51-2.17

ITT Corp Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
DSRI 1.07270.98760.96670.89811.01691.06011.24091.17221.12981.0544
GMI 0.97650.97790.98140.9710.95850.97691.00261.03031.05341.0512
AQI 0.99670.93170.96930.98131.0061.01721.12051.11461.11881.0978
SGI 1.12841.09741.06321.00220.96830.93890.93630.97560.98821.002
DEPI 1.14931.1341.02080.930.92730.93980.98350.98490.93530.9309
SGAI 1.05321.05210.94680.9330.94210.93740.90760.92650.94440.9599
LVGI 0.88120.96830.94881.05961.03590.93741.19881.07221.07061.2249
TATA 0.0692-0.0255-0.0148-0.01820.01530.02690.03180.03050.0054-0.0101
M-score -1.94-2.55-2.52-2.70-2.45-2.33-2.17-2.15-2.29-2.48
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