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GuruFocus has detected 4 Warning Signs with TE Connectivity Ltd $TEL.
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TE Connectivity Ltd (NYSE:TEL)
Beneish M-Score
-2.18 (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.

TE Connectivity Ltd has a M-score of -2.18 signals that the company is a manipulator.

TEL' s Beneish M-Score Range Over the Past 10 Years
Min: -4.25   Max: -2.07
Current: -2.18

-4.25
-2.07

During the past 13 years, the highest Beneish M-Score of TE Connectivity Ltd was -2.07. The lowest was -4.25. 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 TE Connectivity 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 * 1.0439+0.528 * 1.0023+0.404 * 1.0911+0.892 * 1.0375+0.115 * 1.0302
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9883+4.679 * 0.0437-0.327 * 1.0671
=-2.18

* 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 $2,034 Mil.
Revenue was 3063 + 3332 + 3121 + 2952 = $12,468 Mil.
Gross Profit was 1065 + 1104 + 1022 + 962 = $4,153 Mil.
Total Current Assets was $4,809 Mil.
Total Assets was $17,615 Mil.
Property, Plant and Equipment(Net PPE) was $2,956 Mil.
Depreciation, Depletion and Amortization(DDA) was $599 Mil.
Selling, General & Admin. Expense(SGA) was $1,495 Mil.
Total Current Liabilities was $3,513 Mil.
Long-Term Debt was $2,976 Mil.
Net Income was 409 + 437 + 839 + 380 = $2,065 Mil.
Non Operating Income was 0 + -1 + -651 + 12 = $-640 Mil.
Cash Flow from Operations was 404 + 684 + 718 + 130 = $1,936 Mil.
Accounts Receivable was $1,878 Mil.
Revenue was 2833 + 2984 + 3118 + 3082 = $12,017 Mil.
Gross Profit was 945 + 968 + 1048 + 1051 = $4,012 Mil.
Total Current Assets was $6,505 Mil.
Total Assets was $19,223 Mil.
Property, Plant and Equipment(Net PPE) was $2,866 Mil.
Depreciation, Depletion and Amortization(DDA) was $602 Mil.
Selling, General & Admin. Expense(SGA) was $1,458 Mil.
Total Current Liabilities was $3,266 Mil.
Long-Term Debt was $3,370 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)
=(2034 / 12468) / (1878 / 12017)
=0.16313763 / 0.15627861
=1.0439

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)
=(4012 / 12017) / (4153 / 12468)
=0.33386036 / 0.33309272
=1.0023

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 - (4809 + 2956) / 17615) / (1 - (6505 + 2866) / 19223)
=0.55918251 / 0.51251105
=1.0911

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
=12468 / 12017
=1.0375

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))
=(602 / (602 + 2866)) / (599 / (599 + 2956))
=0.17358708 / 0.16849508
=1.0302

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)
=(1495 / 12468) / (1458 / 12017)
=0.11990696 / 0.12132812
=0.9883

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)
=((2976 + 3513) / 17615) / ((3370 + 3266) / 19223)
=0.36837922 / 0.34521147
=1.0671

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
=(2065 - -640 - 1936) / 17615
=0.0437

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.

TE Connectivity Ltd has a M-score of -2.18 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.

TE Connectivity Ltd Annual Data

Sep07Sep08Sep09Sep10Sep11Sep12Sep13Sep14Sep15Sep16
DSRI 1.00840.9261.04210.97190.90781.03821.15620.84241.00870.9647
GMI 1.04770.88231.17420.79021.00951.01760.95030.96620.9931.0138
AQI 0.87791.130.93020.95120.98571.15810.97990.85161.14651.1689
SGI 1.09431.06780.71361.17691.14150.9640.85761.05121.02171.0004
DEPI 1.02670.95350.97780.92511.00830.95561.10050.91210.91121.0831
SGAI 0.99780.88531.25440.92820.98431.01150.99661.01340.95960.9723
LVGI 1.18150.75131.01551.10251.01031.01210.97191.07010.93671.1431
TATA -0.07820.0105-0.2838-0.0443-0.0317-0.0458-0.0318-0.01810.02730.0408
M-score -2.83-2.35-4.01-2.72-2.59-2.63-2.63-2.78-2.25-2.28

TE Connectivity Ltd Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.81090.97960.8010.77281.04780.8091.03341.02340.96471.0439
GMI 0.9620.98040.98730.98610.99730.99691.01261.02351.01381.0023
AQI 0.85161.12741.01061.02091.14650.93981.10851.1461.16891.0911
SGI 1.09191.04991.08841.12960.98360.98820.96820.9651.00041.0375
DEPI 0.91210.9440.79510.7880.91120.87980.99071.01311.08311.0302
SGAI 1.03160.99241.00491.00890.94270.95740.95370.94130.97230.9883
LVGI 1.07011.0881.07331.1010.93670.97141.02891.10661.14311.0671
TATA -0.0181-0.00270.01260.00310.02730.0140.01690.07840.04080.0437
M-score -2.78-2.46-2.58-2.62-2.24-2.62-2.35-2.07-2.28-2.18
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