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GuruFocus has detected 5 Warning Signs with Pentair PLC $PNR.
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Pentair PLC (NYSE:PNR)
Beneish M-Score
-2.71 (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.

Pentair PLC has a M-score of -2.71 suggests that the company is not a manipulator.

PNR' s Beneish M-Score Range Over the Past 10 Years
Min: -3.13   Max: -1.43
Current: -2.71

-3.13
-1.43

During the past 13 years, the highest Beneish M-Score of Pentair PLC was -1.43. The lowest was -3.13. And the median was -2.54.


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 Pentair PLC 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 * 0.9587+0.528 * 0.9734+0.404 * 1.0028+0.892 * 1.0306+0.115 * 0.8614
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0418+4.679 * -0.0419-0.327 * 0.9556
=-2.71

* 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 $764 Mil.
Revenue was 1188.1 + 1210.7 + 1733.3 + 1575.5 = $5,708 Mil.
Gross Profit was 440.1 + 440.9 + 599.2 + 535.4 = $2,016 Mil.
Total Current Assets was $2,672 Mil.
Total Assets was $11,535 Mil.
Property, Plant and Equipment(Net PPE) was $539 Mil.
Depreciation, Depletion and Amortization(DDA) was $181 Mil.
Selling, General & Admin. Expense(SGA) was $1,160 Mil.
Total Current Liabilities was $1,471 Mil.
Long-Term Debt was $4,278 Mil.
Net Income was 131 + 141 + 142.8 + 107.4 = $522 Mil.
Non Operating Income was 209.5 + -67.4 + 1 + 0.9 = $144 Mil.
Cash Flow from Operations was 304.6 + 187.3 + 384.5 + -15 = $861 Mil.
Accounts Receivable was $773 Mil.
Revenue was 1289 + 1112.8 + 1661.2 + 1475 = $5,538 Mil.
Gross Profit was 432.5 + 394.7 + 566.2 + 510.2 = $1,904 Mil.
Total Current Assets was $2,778 Mil.
Total Assets was $11,834 Mil.
Property, Plant and Equipment(Net PPE) was $540 Mil.
Depreciation, Depletion and Amortization(DDA) was $149 Mil.
Selling, General & Admin. Expense(SGA) was $1,080 Mil.
Total Current Liabilities was $1,487 Mil.
Long-Term Debt was $4,686 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)
=(764 / 5707.6) / (773.2 / 5538)
=0.13385661 / 0.13961719
=0.9587

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)
=(1903.6 / 5538) / (2015.6 / 5707.6)
=0.3437342 / 0.35314318
=0.9734

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 - (2672 + 538.6) / 11534.8) / (1 - (2777.6 + 539.8) / 11833.5)
=0.72165967 / 0.71966029
=1.0028

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
=5707.6 / 5538
=1.0306

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))
=(149.3 / (149.3 + 539.8)) / (181 / (181 + 538.6))
=0.21665941 / 0.25152863
=0.8614

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)
=(1159.5 / 5707.6) / (1079.9 / 5538)
=0.20315019 / 0.19499819
=1.0418

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)
=((4278.4 + 1471.2) / 11534.8) / ((4685.8 + 1486.5) / 11833.5)
=0.49845684 / 0.52159547
=0.9556

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
=(522.2 - 144 - 861.4) / 11534.8
=-0.0419

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.

Pentair PLC has a M-score of -2.71 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.

Pentair PLC Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.0070.97811.22881.0090.96551.79730.62031.40760.64820.9328
GMI 0.96041.01981.0380.94970.98861.05680.86810.97511.00260.944
AQI 1.05331.0161.01850.96320.99630.97641.00871.00531.12581.0028
SGI 1.08551.02170.80321.12561.14051.24591.62530.66670.98921.0593
DEPI 0.97740.92350.84281.18010.93311.83680.5691.62170.59390.8614
SGAI 1.00921.06461.00660.9641.10661.29110.82230.98970.90671.0458
LVGI 1.08410.89450.89190.98411.34960.8131.02641.2291.19860.9556
TATA -0.0316-0.0191-0.0349-0.022-0.0719-0.0065-0.0352-0.0746-0.0688-0.0294
M-score -2.58-2.54-2.56-2.47-2.87-1.43-2.53-2.76-3.18-2.66

Pentair PLC Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.91221.46441.40621.45961.84870.54030.81130.70270.38430.9587
GMI 0.88940.96350.99421.01741.02151.01021.01821.00050.98790.9734
AQI 0.96021.00531.01841.01731.10061.12581.06221.06751.03551.0028
SGI 0.99640.64080.62890.61590.52061.18671.25361.32041.57871.0306
DEPI 1.29081.62171.39921.36083.62840.59390.90260.84610.22170.8614
SGAI 0.8161.00591.02240.97921.02730.92330.93310.98280.95241.0418
LVGI 1.1771.2291.20621.14951.2071.19861.14581.13720.95430.9556
TATA -0.0604-0.0776-0.0658-0.0618-0.0209-0.075-0.0841-0.0923-0.0881-0.0419
M-score -2.91-2.76-2.77-2.68-1.94-3.13-2.83-2.93-3.00-2.71
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