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GuruFocus has detected 5 Warning Signs with Rockwell Automation Inc $ROK.
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Rockwell Automation Inc (NYSE:ROK)
Beneish M-Score
-2.55 (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.

Rockwell Automation Inc has a M-score of -2.55 suggests that the company is not a manipulator.

ROK' s Beneish M-Score Range Over the Past 10 Years
Min: -3.12   Max: -1.31
Current: -2.55

-3.12
-1.31

During the past 13 years, the highest Beneish M-Score of Rockwell Automation Inc was -1.31. The lowest was -3.12. 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 Rockwell Automation Inc 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 * 1.0518+0.528 * 0.9941+0.404 * 1.1363+0.892 * 1.0013+0.115 * 1.0051
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0483+4.679 * -0.0535-0.327 * 0.7447
=-2.55

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Mar17) TTM:Last Year (Mar16) TTM:
Accounts Receivable was $1,083 Mil.
Revenue was 1554.3 + 1490.3 + 1538.6 + 1474 = $6,057 Mil.
Gross Profit was 656.5 + 642.3 + 651.9 + 616.8 = $2,568 Mil.
Total Current Assets was $4,159 Mil.
Total Assets was $7,065 Mil.
Property, Plant and Equipment(Net PPE) was $567 Mil.
Depreciation, Depletion and Amortization(DDA) was $167 Mil.
Selling, General & Admin. Expense(SGA) was $1,528 Mil.
Total Current Liabilities was $1,188 Mil.
Long-Term Debt was $1,240 Mil.
Net Income was 189.5 + 214.7 + 185.2 + 191 = $780 Mil.
Non Operating Income was 1.9 + 4 + -7.4 + 0.3 = $-1 Mil.
Cash Flow from Operations was 301 + 310.8 + 272 + 276 = $1,160 Mil.
Accounts Receivable was $1,028 Mil.
Revenue was 1440.3 + 1426.6 + 1607.5 + 1575.2 = $6,050 Mil.
Gross Profit was 594.1 + 612.7 + 664.2 + 678.2 = $2,549 Mil.
Total Current Assets was $4,063 Mil.
Total Assets was $6,540 Mil.
Property, Plant and Equipment(Net PPE) was $572 Mil.
Depreciation, Depletion and Amortization(DDA) was $169 Mil.
Selling, General & Admin. Expense(SGA) was $1,456 Mil.
Total Current Liabilities was $1,505 Mil.
Long-Term Debt was $1,513 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)
=(1082.6 / 6057.2) / (1028 / 6049.6)
=0.17872945 / 0.16992859
=1.0518

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)
=(2549.2 / 6049.6) / (2567.5 / 6057.2)
=0.42138323 / 0.42387572
=0.9941

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 - (4159.3 + 567.2) / 7065) / (1 - (4063 + 571.6) / 6539.6)
=0.33099788 / 0.29130222
=1.1363

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
=6057.2 / 6049.6
=1.0013

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))
=(169.2 / (169.2 + 571.6)) / (166.8 / (166.8 + 567.2))
=0.22840173 / 0.22724796
=1.0051

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)
=(1528 / 6057.2) / (1455.7 / 6049.6)
=0.25226177 / 0.24062748
=1.0483

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)
=((1240 + 1188) / 7065) / ((1513.2 + 1504.9) / 6539.6)
=0.34366596 / 0.46151141
=0.7447

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
=(780.4 - -1.2 - 1159.8) / 7065
=-0.0535

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.

Rockwell Automation Inc has a M-score of -2.55 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.

Rockwell Automation Inc Annual Data

Sep07Sep08Sep09Sep10Sep11Sep12Sep13Sep14Sep15Sep16
DSRI 1.1360.90870.99511.0551.00211.07030.98440.9830.89911.112
GMI 0.99491.02031.1340.90861.00080.98850.99460.97460.97021.0178
AQI 0.82850.95951.09030.89930.91150.94530.89871.00481.11561.1084
SGI 1.09821.13870.76041.12111.23541.04321.01481.04280.95240.9321
DEPI 1.06760.94910.98291.04961.01110.99251.00120.98240.91780.922
SGAI 1.02041.0181.08970.96120.89380.97861.01580.97921.00741.0451
LVGI 1.09721.0160.8951.04160.9441.02220.96960.99371.06031.1135
TATA 0.2255-0.0069-0.0693-0.00340.01180.0041-0.0435-0.0332-0.0537-0.0297
M-score -1.31-2.49-2.90-2.43-2.21-2.39-2.72-2.62-2.87-2.58

Rockwell Automation Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.92460.87710.93130.89910.98431.05081.02761.1121.05761.0518
GMI 0.96920.95870.95540.97020.98551.01171.02981.01781.01220.9941
AQI 0.98550.99130.96741.11561.09381.11811.21571.10840.98611.1363
SGI 1.02351.00370.98850.95240.93250.92270.91770.93210.96481.0013
DEPI 0.94460.93480.93260.91780.93810.91460.91610.9220.93291.0051
SGAI 0.99090.99390.99071.00741.00951.01041.00681.04511.03521.0483
LVGI 1.04911.04941.06551.06031.03821.04081.0351.11351.08380.7447
TATA -0.0399-0.0487-0.0441-0.0537-0.045-0.0388-0.0379-0.0297-0.0438-0.0535
M-score -2.76-2.87-2.82-2.87-2.76-2.65-2.62-2.58-2.70-2.55
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