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GuruFocus has detected 3 Warning Signs with T. Rowe Price Group Inc $TROW.
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T. Rowe Price Group Inc (NAS:TROW)
Beneish M-Score
-1.90 (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.

T. Rowe Price Group Inc has a M-score of -1.90 signals that the company is a manipulator.

TROW' s Beneish M-Score Range Over the Past 10 Years
Min: -3.06   Max: -1.9
Current: -1.9

-3.06
-1.9

During the past 13 years, the highest Beneish M-Score of T. Rowe Price Group Inc was -1.90. The lowest was -3.06. And the median was -2.58.


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 T. Rowe Price Group 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 * 1.015+0.528 * 1.0006+0.404 * 1.1246+0.892 * 1.0053+0.115 * 0.9663
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0278+4.679 * 0.1286-0.327 * 1.2588
=-1.90

* 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 $455 Mil.
Revenue was 1091.2 + 1092.9 + 1044.7 + 994.1 = $4,223 Mil.
Gross Profit was 1010.4 + 1010.9 + 968.3 + 918.8 = $3,908 Mil.
Total Current Assets was $1,660 Mil.
Total Assets was $6,225 Mil.
Property, Plant and Equipment(Net PPE) was $615 Mil.
Depreciation, Depletion and Amortization(DDA) was $133 Mil.
Selling, General & Admin. Expense(SGA) was $1,574 Mil.
Total Current Liabilities was $529 Mil.
Long-Term Debt was $0 Mil.
Net Income was 379.8 + 327.8 + 195.3 + 295.2 = $1,198 Mil.
Non Operating Income was 12.2 + 88.3 + 41.5 + 85.1 = $227 Mil.
Cash Flow from Operations was -97.7 + 299.7 + -95.1 + 63.6 = $171 Mil.
Accounts Receivable was $446 Mil.
Revenue was 1052.2 + 1049 + 1072.4 + 1027 = $4,201 Mil.
Gross Profit was 974.2 + 970.6 + 993.9 + 951.2 = $3,890 Mil.
Total Current Assets was $1,618 Mil.
Total Assets was $5,107 Mil.
Property, Plant and Equipment(Net PPE) was $607 Mil.
Depreciation, Depletion and Amortization(DDA) was $126 Mil.
Selling, General & Admin. Expense(SGA) was $1,523 Mil.
Total Current Liabilities was $345 Mil.
Long-Term Debt was $0 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)
=(455.1 / 4222.9) / (446 / 4200.6)
=0.10776954 / 0.10617531
=1.015

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)
=(3889.9 / 4200.6) / (3908.4 / 4222.9)
=0.92603438 / 0.92552511
=1.0006

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 - (1660 + 615.1) / 6225) / (1 - (1618.3 + 607.1) / 5106.9)
=0.63452209 / 0.56423662
=1.1246

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
=4222.9 / 4200.6
=1.0053

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))
=(126.3 / (126.3 + 607.1)) / (133.4 / (133.4 + 615.1))
=0.17221162 / 0.17822311
=0.9663

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)
=(1573.9 / 4222.9) / (1523.3 / 4200.6)
=0.37270596 / 0.36263867
=1.0278

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)
=((0 + 529.2) / 6225) / ((0 + 344.9) / 5106.9)
=0.08501205 / 0.06753608
=1.2588

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
=(1198.1 - 227.1 - 170.5) / 6225
=0.1286

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.

T. Rowe Price Group Inc has a M-score of -1.90 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.

T. Rowe Price Group Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.70371.57370.98660.85221.05630.97750.97150.95481.015
GMI 1.00711.00711.01020.93571.07880.99950.99961.00191.0006
AQI 1.00860.94761.01190.98561.08020.92331.04091.02431.1246
SGI 0.94970.88241.26761.16051.10031.15281.14291.05491.0053
DEPI 1.05621.09191.12360.89320.89790.9230.85340.92910.9663
SGAI 1.06991.04320.88271.13720.82590.94980.98871.02741.0278
LVGI 0.68110.84770.97820.9191.81710.50331.03351.52971.2588
TATA -0.0705-0.0278-0.0258-0.0528-0.0214-0.0494-0.0401-0.08050.1313
M-score -3.02-2.15-2.32-2.77-2.61-2.46-2.58-3.02-1.89

T. Rowe Price Group Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.99550.97150.95240.95570.94970.95480.93110.95161.03271.015
GMI 0.99830.99971.0011.0021.02690.96380.96460.96520.94571.0006
AQI 1.11181.04091.04141.09171.07431.02431.18841.13411.08771.1246
SGI 1.16391.14291.11911.10381.07231.05491.02790.99941.00311.0053
DEPI 0.82990.85340.90270.92740.94260.92910.91490.9330.95820.9663
SGAI 0.97590.9870.99891.01010.9581.14151.14891.15951.19721.0278
LVGI 0.81951.03352.06631.18711.20161.52970.61561.12011.02491.2588
TATA -0.0338-0.0401-0.0441-0.064-0.073-0.0805-0.00050.04380.06810.1286
M-score -2.41-2.58-2.97-2.76-2.82-3.06-2.37-2.36-2.17-1.90
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