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GuruFocus has detected 3 Warning Signs with Toll Brothers Inc $TOL.
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Toll Brothers Inc (NYSE:TOL)
Beneish M-Score
-2.11 (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 -2.11 signals that the company is a manipulator.

TOL' s Beneish M-Score Range Over the Past 10 Years
Min: -10000000   Max: 10000000
Current: -2.11

-10000000
10000000

During the past 13 years, the highest Beneish M-Score of Toll Brothers Inc was 10000000.00. The lowest was -10000000.00. 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 * 1.1154+0.404 * 1.206+0.892 * 1.2156+0.115 * 1.2231
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9627+4.679 * 0.0034-0.327 * 1.0384
=-2.11

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

This Year (Jan17) TTM:Last Year (Jan16) TTM:
Accounts Receivable was $513 Mil.
Revenue was 920.73 + 1855.451 + 1269.934 + 1115.557 = $5,162 Mil.
Gross Profit was 187.728 + 285.684 + 278.518 + 244.986 = $997 Mil.
Total Current Assets was $7,926 Mil.
Total Assets was $9,517 Mil.
Property, Plant and Equipment(Net PPE) was $172 Mil.
Depreciation, Depletion and Amortization(DDA) was $24 Mil.
Selling, General & Admin. Expense(SGA) was $551 Mil.
Total Current Liabilities was $1,563 Mil.
Long-Term Debt was $3,632 Mil.
Net Income was 70.416 + 114.378 + 105.483 + 89.054 = $379 Mil.
Non Operating Income was 58.207 + 31.907 + 19.443 + 23.219 = $133 Mil.
Cash Flow from Operations was 41.964 + 474.024 + -309.373 + 7.345 = $214 Mil.
Accounts Receivable was $0 Mil.
Revenue was 928.566 + 1437.202 + 1028.011 + 852.583 = $4,246 Mil.
Gross Profit was 216.255 + 320.87 + 203.617 + 174.071 = $915 Mil.
Total Current Assets was $7,546 Mil.
Total Assets was $8,763 Mil.
Property, Plant and Equipment(Net PPE) was $135 Mil.
Depreciation, Depletion and Amortization(DDA) was $23 Mil.
Selling, General & Admin. Expense(SGA) was $471 Mil.
Total Current Liabilities was $1,237 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)
=(512.974 / 5161.672) / (0 / 4246.362)
=0.09938136 / 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)
=(914.813 / 4246.362) / (996.916 / 5161.672)
=0.21543453 / 0.19313819
=1.1154

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 - (7925.888 + 172.459) / 9516.8) / (1 - (7545.644 + 134.746) / 8763.437)
=0.14904726 / 0.12358701
=1.206

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
=5161.672 / 4246.362
=1.2156

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))
=(23.281 / (23.281 + 134.746)) / (23.618 / (23.618 + 172.459))
=0.14732293 / 0.12045268
=1.2231

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)
=(550.681 / 5161.672) / (470.59 / 4246.362)
=0.10668655 / 0.11082192
=0.9627

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)
=((3632.458 + 1563.318) / 9516.8) / ((3370.094 + 1237.378) / 8763.437)
=0.54595831 / 0.52576084
=1.0384

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
=(379.331 - 132.776 - 213.96) / 9516.8
=0.0034

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 -2.11 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

Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17
DSRI 0.695110.92720011.4065111
GMI 0.95360.93330.93810.99570.9811.01761.00670.95331.09011.1154
AQI 0.7760.89430.93531.10191.0440.92630.85541.01351.32371.206
SGI 1.46271.42441.27051.13291.06641.03031.09621.16321.23931.2156
DEPI 1.16251.0881.05881.00051.40680.96391.00471.1131.16871.2231
SGAI 0.86990.86050.90950.98030.98671.03581.00860.97330.94920.9627
LVGI 1.05790.99420.95840.96111.00050.9931.01411.06451.04491.0384
TATA -0.0094-0.0295-0.00590.01140.02350.02310.02320.05130.0140.0034
M-score -2.48-2.28-2.36-3.17-3.17-2.37-1.97-2.12-2.01-2.11
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