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GuruFocus has detected 4 Warning Signs with KLA-Tencor Corp $KLAC.
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KLA-Tencor Corp (NAS:KLAC)
Beneish M-Score
-1.97 (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.

KLA-Tencor Corp has a M-score of -1.97 signals that the company is a manipulator.

KLAC' s Beneish M-Score Range Over the Past 10 Years
Min: -4.23   Max: -0.16
Current: -1.97

-4.23
-0.16

During the past 13 years, the highest Beneish M-Score of KLA-Tencor Corp was -0.16. The lowest was -4.23. And the median was -2.62.


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 KLA-Tencor 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 * 1.2927+0.528 * 0.9247+0.404 * 1.2259+0.892 * 1.0991+0.115 * 1.1225
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.876+4.679 * 0.0075-0.327 * 0.8986
=-1.97

* 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 $655 Mil.
Revenue was 750.673 + 919.171 + 712.433 + 710.245 = $3,093 Mil.
Gross Profit was 472.837 + 581.603 + 437.834 + 429.265 = $1,922 Mil.
Total Current Assets was $3,929 Mil.
Total Assets was $4,996 Mil.
Property, Plant and Equipment(Net PPE) was $272 Mil.
Depreciation, Depletion and Amortization(DDA) was $62 Mil.
Selling, General & Admin. Expense(SGA) was $382 Mil.
Total Current Liabilities was $975 Mil.
Long-Term Debt was $3,019 Mil.
Net Income was 178.101 + 271.541 + 175.777 + 152.207 = $778 Mil.
Non Operating Income was 3.736 + -5.483 + 5.988 + 0 = $4 Mil.
Cash Flow from Operations was 169.777 + 354.093 + 111.497 + 100.324 = $736 Mil.
Accounts Receivable was $461 Mil.
Revenue was 642.644 + 756.332 + 738.459 + 676.357 = $2,814 Mil.
Gross Profit was 372.4 + 433.065 + 418.177 + 393.144 = $1,617 Mil.
Total Current Assets was $3,675 Mil.
Total Assets was $4,571 Mil.
Property, Plant and Equipment(Net PPE) was $303 Mil.
Depreciation, Depletion and Amortization(DDA) was $79 Mil.
Selling, General & Admin. Expense(SGA) was $397 Mil.
Total Current Liabilities was $915 Mil.
Long-Term Debt was $3,151 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)
=(654.699 / 3092.522) / (460.813 / 2813.792)
=0.21170391 / 0.16376939
=1.2927

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)
=(1616.786 / 2813.792) / (1921.539 / 3092.522)
=0.57459329 / 0.62135015
=0.9247

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 - (3929.162 + 272.351) / 4996.098) / (1 - (3675.418 + 302.868) / 4571.323)
=0.15904112 / 0.12972984
=1.2259

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
=3092.522 / 2813.792
=1.0991

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))
=(79.112 / (79.112 + 302.868)) / (61.619 / (61.619 + 272.351))
=0.20711032 / 0.1845046
=1.1225

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)
=(382.124 / 3092.522) / (396.883 / 2813.792)
=0.12356387 / 0.14104916
=0.876

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)
=((3018.567 + 974.741) / 4996.098) / ((3151.046 + 915.241) / 4571.323)
=0.79928536 / 0.88952082
=0.8986

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
=(777.626 - 4.241 - 735.691) / 4996.098
=0.0075

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.

KLA-Tencor Corp has a M-score of -1.97 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 local exchange's currency.

KLA-Tencor Corp Annual Data

Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15Jun16
DSRI 1.00220.91730.70781.74870.75991.20350.83470.91171.23660.9876
GMI 0.9661.03371.2660.7810.91481.03911.02830.97511.01930.9311
AQI 1.53491.4060.84720.83920.74290.81350.92360.93831.12371.3083
SGI 1.3190.92330.60281.19771.74390.9990.89621.03050.96061.0606
DEPI 0.67180.84780.82581.17851.07561.00581.1181.10880.98611.0504
SGAI 0.91620.98491.47470.72680.58621.00981.16110.96321.10040.8792
LVGI 0.99281.60731.06341.04480.89660.90630.96410.9742.9190.9458
TATA -0.0209-0.0688-0.2002-0.0639-0.0037-0.0357-0.07-0.0359-0.022-0.0124
M-score -2.11-2.98-4.08-2.04-2.09-2.49-3.07-2.71-2.99-2.36

KLA-Tencor Corp Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
DSRI 0.91170.96151.07521.18251.23661.07470.68460.97890.98761.2927
GMI 0.97510.9931.01881.03611.01930.99750.98170.95070.93110.9247
AQI 0.93830.98691.10961.11121.12371.14041.05130.98131.30831.2259
SGI 1.03051.0481.02580.95780.96060.96560.9871.01061.06061.0991
DEPI 1.10881.03050.98770.97740.98610.9760.97951.02241.05041.1225
SGAI 0.96320.95150.98611.08391.10041.05920.99360.93030.87920.876
LVGI 0.9740.97792.70242.85792.9193.03681.05361.00530.94580.8986
TATA -0.0359-0.0180.0043-0.0117-0.0209-0.0505-0.07-0.0311-0.01210.0075
M-score -2.71-2.55-2.87-2.97-2.98-3.30-3.12-2.66-2.36-1.97
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