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Pentair Ltd (NYSE:PNR)
Beneish M-Score
-2.47 (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 Ltd has a M-score of -2.47 suggests that the company is not a manipulator.

PNR' s 10-Year Beneish M-Score Range
Min: -2.94   Max: -1.44
Current: -2.47

-2.94
-1.44

During the past 13 years, the highest Beneish M-Score of Pentair Ltd was -1.44. The lowest was -2.94. And the median was -2.50.


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 Ltd 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 * 0.6057+0.528 * 0.8697+0.404 * 0.9917+0.892 * 1.6937+0.115 * 0.6166
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.7958+4.679 * -0.034-0.327 * 1.0275
=-2.47

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

This Year (Dec13) TTM:Last Year (Dec12) TTM:
Accounts Receivable was $1,435 Mil.
Revenue was 1916.7 + 1824.8 + 1963.7 + 1774 = $7,479 Mil.
Gross Profit was 644.1 + 637.6 + 667.4 + 524 = $2,473 Mil.
Total Current Assets was $3,232 Mil.
Total Assets was $11,743 Mil.
Property, Plant and Equipment(Net PPE) was $1,170 Mil.
Depreciation, Depletion and Amortization(DDA) was $286 Mil.
Selling, General & Admin. Expense(SGA) was $1,562 Mil.
Total Current Liabilities was $1,610 Mil.
Long-Term Debt was $2,553 Mil.
Net Income was 158.2 + 172.8 + 154.1 + 52 = $537 Mil.
Non Operating Income was 3.1 + 0.6 + 0.9 + 17 = $22 Mil.
Cash Flow from Operations was 285.5 + 243.7 + 366.1 + 20 = $915 Mil.
Accounts Receivable was $1,399 Mil.
Revenue was 1750.9 + 865.5 + 941.5 + 858 = $4,416 Mil.
Gross Profit was 398.7 + 278.1 + 312.1 + 281 = $1,270 Mil.
Total Current Assets was $3,204 Mil.
Total Assets was $11,883 Mil.
Property, Plant and Equipment(Net PPE) was $1,188 Mil.
Depreciation, Depletion and Amortization(DDA) was $164 Mil.
Selling, General & Admin. Expense(SGA) was $1,159 Mil.
Total Current Liabilities was $1,645 Mil.
Long-Term Debt was $2,454 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)
=(1435.1 / 7479.2) / (1399 / 4415.9)
=0.19187881 / 0.31680971
=0.6057

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)
=(637.6 / 4415.9) / (644.1 / 7479.2)
=0.28757445 / 0.33066371
=0.8697

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 - (3232.1 + 1170) / 11743.3) / (1 - (3204.3 + 1188.2) / 11882.7)
=0.62513944 / 0.63034496
=0.9917

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
=7479.2 / 4415.9
=1.6937

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))
=(163.8 / (163.8 + 1188.2)) / (286.1 / (286.1 + 1170))
=0.12115385 / 0.19648376
=0.6166

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)
=(1562.1 / 7479.2) / (1159 / 4415.9)
=0.20885924 / 0.26246065
=0.7958

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)
=((2552.6 + 1610.2) / 11743.3) / ((2454.3 + 1645.1) / 11882.7)
=0.35448298 / 0.34498893
=1.0275

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
=(537.1 - 21.6 - 915.3) / 11743.3
=-0.034

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 Ltd has a M-score of -2.47 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 own currency.

Pentair Ltd Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 1.1370.82660.97091.0070.97811.22881.0091.05831.75520.6056
GMI 0.9450.99860.97080.96041.01981.0380.94970.98851.08040.8696
AQI 1.01611.0020.98121.05331.0161.01850.96320.99630.97640.9917
SGI 1.38661.29341.02581.08551.02170.80321.12561.14051.27761.6937
DEPI 1.05290.81241.03310.97740.92350.84281.18010.93291.80070.6166
SGAI 1.07150.98471.07191.00921.06461.00660.9641.10671.3050.7962
LVGI 0.90610.9760.94421.08410.89450.89190.98411.34960.8131.0275
TATA -0.0178-0.021-0.0133-0.0316-0.0191-0.0349-0.022-0.0719-0.0086-0.0341
M-score -2.09-2.49-2.56-2.58-2.54-2.56-2.47-2.79-1.44-2.47

Pentair Ltd Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
DSRI 1.01141.05830.96040.87242.24561.75531.49841.40830.47530.6057
GMI 0.98230.98850.98880.98020.96731.08011.10561.08091.05630.8697
AQI 1.00890.99630.9980.97570.89910.97640.9810.97491.11010.9917
SGI 1.12271.14051.13181.10151.05561.27751.51281.7872.07141.6937
DEPI 1.17450.93290.89790.81212.3841.80071.47031.22930.31750.6166
SGAI 1.02611.10671.13761.13551.19451.30571.2791.24291.11260.7958
LVGI 1.32921.34961.32710.99640.72690.8130.80860.91751.18811.0275
TATA -0.0126-0.0719-0.0628-0.0715-0.0284-0.0086-0.0184-0.0228-0.0244-0.034
M-score -2.52-2.79-2.84-2.91-1.26-1.44-1.53-1.46-2.21-2.47
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