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GuruFocus has detected 6 Warning Signs with Westinghouse Air Brake Technologies Corp $WAB.
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Westinghouse Air Brake Technologies Corp (NYSE:WAB)
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.

Westinghouse Air Brake Technologies Corp has a M-score of -2.18 signals that the company is a manipulator.

WAB' s Beneish M-Score Range Over the Past 10 Years
Min: -3.42   Max: -1.43
Current: -2.18

-3.42
-1.43

During the past 13 years, the highest Beneish M-Score of Westinghouse Air Brake Technologies Corp was -1.43. The lowest was -3.42. And the median was -2.45.


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 * 1.5221+0.528 * 1.0046+0.404 * 1.2005+0.892 * 0.8861+0.115 * 1.3053
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.2079+4.679 * -0.0215-0.327 * 1.1835
=-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 $668 Mil.
Revenue was 759.982 + 675.574 + 723.601 + 772.031 = $2,931 Mil.
Gross Profit was 219.189 + 212.481 + 237.389 + 255.18 = $924 Mil.
Total Current Assets was $2,868 Mil.
Total Assets was $6,581 Mil.
Property, Plant and Equipment(Net PPE) was $518 Mil.
Depreciation, Depletion and Amortization(DDA) was $70 Mil.
Selling, General & Admin. Expense(SGA) was $372 Mil.
Total Current Liabilities was $1,447 Mil.
Long-Term Debt was $1,763 Mil.
Net Income was 37.811 + 82.428 + 90.485 + 94.163 = $305 Mil.
Non Operating Income was -3.076 + 1.188 + -1.229 + 0.154 = $-3 Mil.
Cash Flow from Operations was 202.414 + 32.917 + 138.41 + 75.566 = $449 Mil.
Accounts Receivable was $495 Mil.
Revenue was 832.849 + 809.527 + 847.028 + 818.594 = $3,308 Mil.
Gross Profit was 267.628 + 257.069 + 267.764 + 255.355 = $1,048 Mil.
Total Current Assets was $1,612 Mil.
Total Assets was $3,300 Mil.
Property, Plant and Equipment(Net PPE) was $353 Mil.
Depreciation, Depletion and Amortization(DDA) was $65 Mil.
Selling, General & Admin. Expense(SGA) was $347 Mil.
Total Current Liabilities was $665 Mil.
Long-Term Debt was $695 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)
=(667.596 / 2931.188) / (494.975 / 3307.998)
=0.22775612 / 0.14962978
=1.5221

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)
=(1047.816 / 3307.998) / (924.239 / 2931.188)
=0.31675231 / 0.31531209
=1.0046

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 - (2867.631 + 518.376) / 6581.018) / (1 - (1612.448 + 353.193) / 3300.335)
=0.48548887 / 0.40441167
=1.2005

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
=2931.188 / 3307.998
=0.8861

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))
=(64.734 / (64.734 + 353.193)) / (69.795 / (69.795 + 518.376))
=0.15489308 / 0.11866447
=1.3053

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)
=(371.805 / 2931.188) / (347.373 / 3307.998)
=0.12684447 / 0.10501004
=1.2079

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)
=((1762.967 + 1446.639) / 6581.018) / ((695.294 + 664.776) / 3300.335)
=0.48770661 / 0.41210059
=1.1835

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
=(304.887 - -2.963 - 449.307) / 6581.018
=-0.0215

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 -2.18 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.

Westinghouse Air Brake Technologies Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.00211.06320.85531.15291.02740.92661.3250.67421.02721.5221
GMI 1.00411.00180.96670.94171.02790.9980.97570.96830.97061.0046
AQI 1.0541.42241.14911.00650.92581.05710.99620.93441.0071.2005
SGI 1.25051.15780.89011.07521.30571.21521.07331.18631.08660.8861
DEPI 0.92071.09610.83920.94990.93791.09750.97891.02230.98781.3053
SGAI 0.9110.99261.06031.13160.96780.81680.99621.04130.98511.2079
LVGI 0.94971.28520.8480.96691.07160.85320.98521.04451.08121.1835
TATA -0.0253-0.0193-0.0287-0.0294-0.03620.00640.0204-0.036-0.0134-0.0215
M-score -2.33-2.28-2.78-2.46-2.39-2.21-2.03-2.84-2.48-2.18

Westinghouse Air Brake Technologies Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.71530.67420.65040.90670.88011.02720.9320.91261.10481.5221
GMI 0.98280.96830.96420.96210.96710.97060.96480.96280.96931.0046
AQI 0.88830.93441.00141.00920.95091.0070.95530.95381.00711.2005
SGI 1.16421.18631.19711.19881.13461.08661.02960.95560.91140.8861
DEPI 1.06871.02231.06770.88310.94860.98780.98360.96530.99671.3053
SGAI 1.01381.04131.05541.06741.01690.98511.00891.01331.04511.2079
LVGI 1.04451.04450.99670.90290.89711.08121.22511.251.26821.1835
TATA -0.0151-0.036-0.0371-0.0177-0.0296-0.0134-0.024-0.0486-0.0214-0.0215
M-score -2.73-2.84-2.82-2.48-2.62-2.48-2.74-2.95-2.67-2.18
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