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ITT Corp (NYSE:ITT)
Beneish M-Score
-1.89 (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 -1.89 signals that the company is a manipulator.

ITT' s 10-Year Beneish M-Score Range
Min: -3.77   Max: 4.33
Current: -1.89

-3.77
4.33

During the past 13 years, the highest Beneish M-Score of ITT Corp was 4.33. The lowest was -3.77. 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 * 1.1043+0.528 * 0.9765+0.404 * 0.9967+0.892 * 1.1284+0.115 * 1.1493
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9898+4.679 * 0.0722-0.327 * 0.8812
=-1.89

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

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $622 Mil.
Revenue was 663 + 674.5 + 645.5 + 634 = $2,617 Mil.
Gross Profit was 214.8 + 214.8 + 208.6 + 202.9 = $841 Mil.
Total Current Assets was $1,758 Mil.
Total Assets was $3,813 Mil.
Property, Plant and Equipment(Net PPE) was $443 Mil.
Depreciation, Depletion and Amortization(DDA) was $85 Mil.
Selling, General & Admin. Expense(SGA) was $498 Mil.
Total Current Liabilities was $840 Mil.
Long-Term Debt was $0 Mil.
Net Income was 38.3 + 32.2 + 11.2 + 430.7 = $512 Mil.
Non Operating Income was 0 + -2.2 + -1.8 + 0 = $-4 Mil.
Cash Flow from Operations was 93.4 + -13.6 + 146.4 + 15.1 = $241 Mil.
Accounts Receivable was $499 Mil.
Revenue was 609.2 + 608.2 + 554.3 + 547.5 = $2,319 Mil.
Gross Profit was 197.8 + 190.5 + 173.4 + 166.2 = $728 Mil.
Total Current Assets was $1,571 Mil.
Total Assets was $3,366 Mil.
Property, Plant and Equipment(Net PPE) was $367 Mil.
Depreciation, Depletion and Amortization(DDA) was $83 Mil.
Selling, General & Admin. Expense(SGA) was $446 Mil.
Total Current Liabilities was $842 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)
=(622.2 / 2617) / (499.3 / 2319.2)
=0.23775315 / 0.21528976
=1.1043

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 / 2319.2) / (214.8 / 2617)
=0.31385823 / 0.32139855
=0.9765

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 - (1757.6 + 443) / 3812.5) / (1 - (1570.6 + 367.4) / 3365.8)
=0.42279344 / 0.42420821
=0.9967

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
=2617 / 2319.2
=1.1284

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))
=(82.9 / (82.9 + 367.4)) / (84.5 / (84.5 + 443))
=0.18409949 / 0.16018957
=1.1493

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)
=(498 / 2617) / (445.9 / 2319.2)
=0.19029423 / 0.19226457
=0.9898

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 + 839.9) / 3812.5) / ((0 + 841.5) / 3365.8)
=0.22030164 / 0.25001486
=0.8812

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
=(512.4 - -4 - 241.3) / 3812.5
=0.0722

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 -1.89 signals that the company is likely to 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 0.98660.91350.97041.30190.78020.97996.25710.18211.05561.0065
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 -2.42-2.53-2.61-2.09-2.49-2.821.63-3.67-2.43-2.06

ITT Corp Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.27610.27380.20651.05550.78620.76471.18491.00651.11811.1043
GMI 1.04671.05861.05621.01280.98790.96130.95150.95320.96070.9765
AQI 0.35460.76270.70021.00522.18711.01161.17611.01351.01310.9967
SGI 1.12161.12451.14121.06821.06951.09081.11491.12081.13021.1284
DEPI 0.89410.28890.29151.13430.31670.95090.93650.94511.10831.1493
SGAI 0.94650.9250.86760.45560.50840.54190.55131.07331.0490.9898
LVGI 0.74870.75530.67851.0471.01261.00441.01590.9360.88230.8812
TATA -0.1122-0.1447-0.117-0.0335-0.019-0.01370.09670.07190.07350.0722
M-score -3.72-3.77-3.68-2.42-2.23-2.62-1.64-2.05-1.88-1.89
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