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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
-1.91 (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 -1.91 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: -1.91

-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 -2.61.


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 * 1.358+0.528 * 0.9225+0.404 * 1.1801+0.892 * 1.1445+0.115 * 1.1782
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8526+4.679 * -0.0004-0.327 * 0.8768
=-1.91

* 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 $664 Mil.
Revenue was 876.885 + 750.673 + 919.171 + 712.433 = $3,259 Mil.
Gross Profit was 558.378 + 472.837 + 581.603 + 437.834 = $2,051 Mil.
Total Current Assets was $4,032 Mil.
Total Assets was $5,094 Mil.
Property, Plant and Equipment(Net PPE) was $280 Mil.
Depreciation, Depletion and Amortization(DDA) was $60 Mil.
Selling, General & Admin. Expense(SGA) was $379 Mil.
Total Current Liabilities was $1,188 Mil.
Long-Term Debt was $2,729 Mil.
Net Income was 238.251 + 178.101 + 271.541 + 175.777 = $864 Mil.
Non Operating Income was 3.535 + 3.736 + -5.483 + 5.988 = $8 Mil.
Cash Flow from Operations was 222.413 + 169.777 + 354.093 + 111.497 = $858 Mil.
Accounts Receivable was $427 Mil.
Revenue was 710.245 + 642.644 + 756.332 + 738.459 = $2,848 Mil.
Gross Profit was 429.265 + 372.4 + 433.065 + 418.177 = $1,653 Mil.
Total Current Assets was $3,685 Mil.
Total Assets was $4,573 Mil.
Property, Plant and Equipment(Net PPE) was $292 Mil.
Depreciation, Depletion and Amortization(DDA) was $77 Mil.
Selling, General & Admin. Expense(SGA) was $389 Mil.
Total Current Liabilities was $858 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)
=(663.852 / 3259.162) / (427.115 / 2847.68)
=0.20368794 / 0.14998701
=1.358

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)
=(1652.907 / 2847.68) / (2050.652 / 3259.162)
=0.58043987 / 0.62919609
=0.9225

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 - (4031.639 + 279.966) / 5094.456) / (1 - (3684.705 + 292.393) / 4572.516)
=0.15366724 / 0.13021671
=1.1801

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
=3259.162 / 2847.68
=1.1445

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))
=(76.74 / (76.74 + 292.393)) / (59.982 / (59.982 + 279.966))
=0.20789255 / 0.17644463
=1.1782

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)
=(379.124 / 3259.162) / (388.542 / 2847.68)
=0.11632561 / 0.13644159
=0.8526

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)
=((2729.239 + 1187.736) / 5094.456) / ((3151.25 + 858.33) / 4572.516)
=0.76887012 / 0.87688704
=0.8768

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
=(863.67 - 7.776 - 857.78) / 5094.456
=-0.0004

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 -1.91 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

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.96151.07521.18251.23661.07470.68460.97890.98761.29271.358
GMI 0.9931.01881.03611.01930.99750.98170.95070.93110.92470.9225
AQI 0.98691.10961.11121.12371.14041.05130.98131.30831.22591.1801
SGI 1.0481.02580.95780.96060.96560.9871.01061.06061.09911.1445
DEPI 1.03050.98770.97740.98610.9760.97951.02241.05041.12251.1782
SGAI 0.95150.98611.08391.10041.05920.99360.93030.87920.8760.8526
LVGI 0.97792.70242.85792.9193.03681.05361.00530.94580.89860.8768
TATA -0.0180.0043-0.0117-0.0209-0.0505-0.0703-0.0314-0.01240.0072-0.0004
M-score -2.55-2.87-2.97-2.98-3.30-3.12-2.66-2.36-1.97-1.91
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