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GuruFocus has detected 5 Warning Signs with The Estee Lauder Companies Inc $EL.
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The Estee Lauder Companies Inc (NYSE:EL)
Beneish M-Score
-2.62 (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.

The Estee Lauder Companies Inc has a M-score of -2.62 suggests that the company is not a manipulator.

EL' s Beneish M-Score Range Over the Past 10 Years
Min: -3.23   Max: -2.04
Current: -2.62

-3.23
-2.04

During the past 13 years, the highest Beneish M-Score of The Estee Lauder Companies Inc was -2.04. The lowest was -3.23. And the median was -2.63.


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 The Estee Lauder Companies 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 * 1.038+0.528 * 1.01+0.404 * 1.2354+0.892 * 1.0391+0.115 * 0.9772
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9838+4.679 * -0.0534-0.327 * 1.1874
=-2.62

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

This Year (Mar17) TTM:Last Year (Mar16) TTM:
Accounts Receivable was $1,528 Mil.
Revenue was 2857 + 3208 + 2865 + 2646.3 = $11,576 Mil.
Gross Profit was 2266 + 2571 + 2269 + 2135.2 = $9,241 Mil.
Total Current Assets was $4,972 Mil.
Total Assets was $11,445 Mil.
Property, Plant and Equipment(Net PPE) was $1,576 Mil.
Depreciation, Depletion and Amortization(DDA) was $447 Mil.
Selling, General & Admin. Expense(SGA) was $7,415 Mil.
Total Current Liabilities was $2,860 Mil.
Long-Term Debt was $3,377 Mil.
Net Income was 298 + 428 + 294 + 93.6 = $1,114 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 428 + 974 + -150 + 472.7 = $1,725 Mil.
Accounts Receivable was $1,417 Mil.
Revenue was 2657 + 3124 + 2835 + 2524.4 = $11,140 Mil.
Gross Profit was 2153 + 2535 + 2258 + 2036.4 = $8,982 Mil.
Total Current Assets was $4,252 Mil.
Total Assets was $8,816 Mil.
Property, Plant and Equipment(Net PPE) was $1,511 Mil.
Depreciation, Depletion and Amortization(DDA) was $416 Mil.
Selling, General & Admin. Expense(SGA) was $7,253 Mil.
Total Current Liabilities was $2,434 Mil.
Long-Term Debt was $1,613 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)
=(1528 / 11576.3) / (1416.6 / 11140.4)
=0.13199381 / 0.12715881
=1.038

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)
=(8982.4 / 11140.4) / (9241.2 / 11576.3)
=0.80629062 / 0.79828615
=1.01

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 - (4972 + 1576) / 11445) / (1 - (4252.3 + 1510.5) / 8816.3)
=0.42787243 / 0.34634711
=1.2354

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
=11576.3 / 11140.4
=1.0391

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))
=(415.7 / (415.7 + 1510.5)) / (446.7 / (446.7 + 1576))
=0.21581352 / 0.22084343
=0.9772

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)
=(7414.8 / 11576.3) / (7253.1 / 11140.4)
=0.64051554 / 0.6510628
=0.9838

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)
=((3377 + 2860) / 11445) / ((1612.5 + 2433.7) / 8816.3)
=0.54495413 / 0.45894536
=1.1874

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
=(1113.6 - 0 - 1724.7) / 11445
=-0.0534

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.

The Estee Lauder Companies Inc has a M-score of -2.62 suggests that the company will not 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.

The Estee Lauder Companies Inc Annual Data

Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15Jun16
DSRI 1.02481.07390.88730.82151.12131.0171.05431.09270.86641.0255
GMI 0.98831.00031.00610.97090.9810.98190.99190.99720.99760.9985
AQI 1.0860.96691.01440.93381.03130.99230.91730.93451.58471.1931
SGI 1.08881.12410.92581.06441.13011.10261.04821.07730.98281.0447
DEPI 1.08930.98280.9770.96821.00021.05760.970.97960.94581.0382
SGAI 1.01891.00341.03660.97470.99481.0070.99510.9831.03020.993
LVGI 1.24030.90420.99220.94650.92581.00560.94170.94171.05361.0992
TATA -0.0515-0.0432-0.0923-0.0971-0.0469-0.0425-0.0321-0.0421-0.1039-0.0731
M-score -2.66-2.49-3.08-3.07-2.44-2.58-2.56-2.53-2.90-2.71

The Estee Lauder Companies Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.88460.93610.86641.01910.9981.03421.02551.02631.03971.038
GMI 0.99860.99790.99760.99760.99920.99780.99850.99991.00331.01
AQI 1.31071.40981.58471.5691.19661.23641.19311.1831.42561.2354
SGI 1.05371.0310.98281.00551.01031.01451.04471.0281.02821.0391
DEPI 0.9520.91530.94580.99271.00661.03711.03821.02191.00050.9772
SGAI 0.98680.98921.03021.00590.99991.01020.9931.00351.00090.9838
LVGI 0.99890.9581.05361.13461.11181.08791.09921.02391.1891.1874
TATA -0.0779-0.0688-0.1039-0.0776-0.0851-0.0794-0.0731-0.0568-0.0508-0.0534
M-score -2.78-2.66-2.90-2.64-2.83-2.74-2.71-2.63-2.54-2.62
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