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GuruFocus has detected 1 Warning Sign with Toll Brothers Inc $TOL.
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Toll Brothers Inc (NYSE:TOL)
Beneish M-Score
-2.01 (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.

Toll Brothers Inc has a M-score of -2.01 signals that the company is a manipulator.

TOL' s Beneish M-Score Range Over the Past 10 Years
Min: -3.96   Max: 3.36
Current: -2.01

-3.96
3.36

During the past 13 years, the highest Beneish M-Score of Toll Brothers Inc was 3.36. The lowest was -3.96. And the median was -2.01.


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 Toll Brothers 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+0.528 * 1.0901+0.404 * 1.3237+0.892 * 1.2393+0.115 * 1.1687
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9492+4.679 * 0.014-0.327 * 1.0449
=-2.01

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

This Year (Oct16) TTM:Last Year (Oct15) TTM:
Accounts Receivable was $583 Mil.
Revenue was 1855.451 + 1269.934 + 1115.557 + 928.566 = $5,170 Mil.
Gross Profit was 285.684 + 278.518 + 244.986 + 216.255 = $1,025 Mil.
Total Current Assets was $8,019 Mil.
Total Assets was $9,737 Mil.
Property, Plant and Equipment(Net PPE) was $251 Mil.
Depreciation, Depletion and Amortization(DDA) was $23 Mil.
Selling, General & Admin. Expense(SGA) was $535 Mil.
Total Current Liabilities was $1,726 Mil.
Long-Term Debt was $3,775 Mil.
Net Income was 114.378 + 105.483 + 89.054 + 73.18 = $382 Mil.
Non Operating Income was 31.907 + 19.443 + 23.219 + 21.954 = $97 Mil.
Cash Flow from Operations was 474.024 + -309.373 + 7.345 + -23.225 = $149 Mil.
Accounts Receivable was $0 Mil.
Revenue was 1437.202 + 1028.011 + 852.583 + 853.452 = $4,171 Mil.
Gross Profit was 320.87 + 203.617 + 174.071 + 203.42 = $902 Mil.
Total Current Assets was $7,943 Mil.
Total Assets was $9,207 Mil.
Property, Plant and Equipment(Net PPE) was $216 Mil.
Depreciation, Depletion and Amortization(DDA) was $24 Mil.
Selling, General & Admin. Expense(SGA) was $455 Mil.
Total Current Liabilities was $1,188 Mil.
Long-Term Debt was $3,790 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)
=(582.758 / 5169.508) / (0 / 4171.248)
=0.11272988 / 0
=1

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)
=(901.978 / 4171.248) / (1025.443 / 5169.508)
=0.21623696 / 0.19836375
=1.0901

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 - (8018.973 + 251.269) / 9736.789) / (1 - (7943.305 + 215.643) / 9206.515)
=0.15061916 / 0.1137854
=1.3237

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
=5169.508 / 4171.248
=1.2393

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))
=(23.557 / (23.557 + 215.643)) / (23.121 / (23.121 + 251.269))
=0.09848244 / 0.08426327
=1.1687

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)
=(535.382 / 5169.508) / (455.108 / 4171.248)
=0.10356537 / 0.10910596
=0.9492

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)
=((3775.451 + 1726.136) / 9736.789) / ((3790.24 + 1188.196) / 9206.515)
=0.56503094 / 0.54075141
=1.0449

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
=(382.095 - 96.523 - 148.771) / 9736.789
=0.014

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.

Toll Brothers Inc has a M-score of -2.01 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.

Toll Brothers Inc Annual Data

Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Oct15Oct16
DSRI 0.54321.23241.50991.18981.7613010.695101
GMI 2.513912.4098-0.0807-1.41190.54260.78250.92070.95360.9811.0901
AQI 1.50951.73080.84821.22570.4734.1720.80890.7761.0441.3237
SGI 0.75690.67920.55760.85160.98741.27571.42041.46271.06641.2393
DEPI 0.93781.06240.97351.26441.06451.10551.05791.16251.40681.1687
SGAI 1.19051.22491.30670.98691.00560.86160.83310.86990.98670.9492
LVGI 0.93040.99631.05740.91190.99371.0141.03431.05791.00051.0449
TATA -0.0352-0.1424-0.18060.0187-0.00640.09930.0992-0.00940.02350.014
M-score -2.293.07-3.96-3.47-2.27-1.49-1.74-2.48-3.17-2.01

Toll Brothers Inc Quarterly Data

Jul14Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16
DSRI 10.695110.92720011.406511
GMI 0.92990.95360.93330.93810.99570.9811.01761.00670.95331.0901
AQI 0.7070.7760.89430.93531.10191.0440.92630.85541.01351.3237
SGI 1.59351.46271.42441.27051.13291.06641.03031.09621.16321.2393
DEPI 1.12691.16251.0881.05881.00051.40680.96391.00471.1131.1687
SGAI 0.79320.86990.86050.90950.98030.98671.03581.00860.97330.9492
LVGI 1.03221.05790.99420.95840.96111.00050.9931.01411.06451.0449
TATA 0.0326-0.0094-0.0295-0.00590.01140.02350.02310.02320.05130.014
M-score -1.91-2.48-2.28-2.36-3.17-3.17-2.37-1.97-2.12-2.01
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