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Westinghouse Air Brake Technologies Corp (NYSE:WAB)
Beneish M-Score
-2.10 (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.

Westinghouse Air Brake Technologies Corp has a M-score of -2.10 signals that the company is a manipulator.

WAB' s 10-Year Beneish M-Score Range
Min: -3.1   Max: -1.59
Current: -2.1

-3.1
-1.59

During the past 13 years, the highest Beneish M-Score of Westinghouse Air Brake Technologies Corp was -1.59. The lowest was -3.10. And the median was -2.40.


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 Westinghouse Air Brake Technologies Corp 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 * 1.3138+0.528 * 0.9884+0.404 * 0.9481+0.892 * 1.1174+0.115 * 1.2413
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9832+4.679 * -0.0034-0.327 * 1.009
=-2.10

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Accounts Receivable was $717 Mil.
Revenue was 731.068 + 695.249 + 681.482 + 631.398 = $2,739 Mil.
Gross Profit was 224.658 + 209.569 + 200.125 + 188.133 = $822 Mil.
Total Current Assets was $1,527 Mil.
Total Assets was $3,164 Mil.
Property, Plant and Equipment(Net PPE) was $343 Mil.
Depreciation, Depletion and Amortization(DDA) was $54 Mil.
Selling, General & Admin. Expense(SGA) was $278 Mil.
Total Current Liabilities was $668 Mil.
Long-Term Debt was $500 Mil.
Net Income was 88.705 + 80.134 + 74.041 + 73.943 = $317 Mil.
Non Operating Income was 0.243 + -0.017 + 0.951 + -1.658 = $-0 Mil.
Cash Flow from Operations was 111.444 + 26.215 + 150.657 + 39.9 = $328 Mil.
Accounts Receivable was $488 Mil.
Revenue was 638.002 + 615.51 + 610.4 + 587.593 = $2,452 Mil.
Gross Profit was 192.881 + 182.888 + 180.48 + 171.279 = $728 Mil.
Total Current Assets was $1,190 Mil.
Total Assets was $2,516 Mil.
Property, Plant and Equipment(Net PPE) was $241 Mil.
Depreciation, Depletion and Amortization(DDA) was $49 Mil.
Selling, General & Admin. Expense(SGA) was $253 Mil.
Total Current Liabilities was $524 Mil.
Long-Term Debt was $397 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)
=(717.05 / 2739.197) / (488.449 / 2451.505)
=0.2617738 / 0.19924455
=1.3138

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)
=(209.569 / 2451.505) / (224.658 / 2739.197)
=0.2967679 / 0.300265
=0.9884

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 - (1526.851 + 343.154) / 3163.868) / (1 - (1189.985 + 240.966) / 2516.39)
=0.40894974 / 0.43134768
=0.9481

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
=2739.197 / 2451.505
=1.1174

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))
=(48.961 / (48.961 + 240.966)) / (54.036 / (54.036 + 343.154))
=0.16887354 / 0.13604572
=1.2413

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)
=(277.607 / 2739.197) / (252.691 / 2451.505)
=0.10134612 / 0.10307587
=0.9832

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)
=((500.219 + 668.416) / 3163.868) / ((396.915 + 524.272) / 2516.39)
=0.36936908 / 0.36607481
=1.009

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
=(316.823 - -0.481 - 328.216) / 3163.868
=-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.

Westinghouse Air Brake Technologies Corp has a M-score of -2.10 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 own currency.

Westinghouse Air Brake Technologies Corp Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
DSRI 0.94621.17610.81491.00211.06320.85531.15291.02740.92661.325
GMI 1.05730.9940.92021.00411.00180.96670.94171.02790.9980.9757
AQI 1.03470.80661.10851.0541.42241.14911.00650.92581.05710.9962
SGI 1.1451.25791.05181.25051.15780.89011.07521.30571.21521.0733
DEPI 0.95721.07581.0810.92071.09610.83920.94990.93791.09750.9789
SGAI 0.95840.83860.8020.9110.99261.06031.13160.96780.81680.9962
LVGI 0.88081.00740.86480.94971.28520.8480.96691.07160.85320.9852
TATA -0.0272-0.0302-0.0666-0.0253-0.0193-0.0287-0.0294-0.03620.00640.0204
M-score -2.44-2.28-2.83-2.33-2.28-2.78-2.46-2.39-2.21-2.03

Westinghouse Air Brake Technologies Corp Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
DSRI 0.98921.00450.97950.92660.9441.00341.22991.3251.34721.3138
GMI 1.02431.03221.03720.9980.99060.96440.95760.97570.97780.9884
AQI 0.90050.96340.97321.05711.10081.04591.14950.99620.9490.9481
SGI 1.31121.30741.26781.21521.15631.1011.07771.07331.09191.1174
DEPI 0.96960.99071.13251.09751.04820.96740.99850.97890.95681.2413
SGAI 0.94280.80230.79590.81680.84180.95640.98280.99620.99160.9832
LVGI 1.06211.05490.99420.85320.94050.85930.87280.98520.90551.009
TATA -0.01970.0017-0.0120.0064-0.00210.00830.02470.02040.0251-0.0034
M-score -2.35-2.18-2.26-2.21-2.31-2.30-2.00-2.03-1.97-2.10
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