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GuruFocus has detected 5 Warning Signs with Esterline Technologies Corp $ESL.
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Esterline Technologies Corp (NYSE:ESL)
Beneish M-Score
-2.50 (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.

Esterline Technologies Corp has a M-score of -2.50 suggests that the company is not a manipulator.

ESL' s Beneish M-Score Range Over the Past 10 Years
Min: -3.82   Max: -1.86
Current: -2.5

-3.82
-1.86

During the past 13 years, the highest Beneish M-Score of Esterline Technologies Corp was -1.86. The lowest was -3.82. And the median was -2.53.


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 Esterline 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 * 0.9252+0.528 * 0.9628+0.404 * 0.949+0.892 * 1.1523+0.115 * 0.9121
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9738+4.679 * -0.0157-0.327 * 0.9128
=-2.50

* 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 $399 Mil.
Revenue was 509.182 + 457.733 + 543.752 + 517.092 = $2,028 Mil.
Gross Profit was 175.919 + 144.047 + 193.769 + 173.584 = $687 Mil.
Total Current Assets was $1,154 Mil.
Total Assets was $2,946 Mil.
Property, Plant and Equipment(Net PPE) was $334 Mil.
Depreciation, Depletion and Amortization(DDA) was $103 Mil.
Selling, General & Admin. Expense(SGA) was $391 Mil.
Total Current Liabilities was $377 Mil.
Long-Term Debt was $764 Mil.
Net Income was 35.113 + 16.189 + 52.272 + 29.356 = $133 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 45.81 + 45.535 + 48.546 + 39.224 = $179 Mil.
Accounts Receivable was $374 Mil.
Revenue was 490.31 + 441.477 + 331.808 + 496.217 = $1,760 Mil.
Gross Profit was 156.173 + 137.719 + 110.596 + 169.796 = $574 Mil.
Total Current Assets was $1,114 Mil.
Total Assets was $3,012 Mil.
Property, Plant and Equipment(Net PPE) was $327 Mil.
Depreciation, Depletion and Amortization(DDA) was $89 Mil.
Selling, General & Admin. Expense(SGA) was $349 Mil.
Total Current Liabilities was $414 Mil.
Long-Term Debt was $864 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)
=(398.793 / 2027.759) / (374.09 / 1759.812)
=0.19666686 / 0.21257384
=0.9252

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)
=(574.284 / 1759.812) / (687.319 / 2027.759)
=0.32633259 / 0.33895497
=0.9628

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 - (1154.464 + 333.745) / 2946.476) / (1 - (1113.86 + 327.364) / 3012.04)
=0.49491902 / 0.52151233
=0.949

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
=2027.759 / 1759.812
=1.1523

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))
=(89.458 / (89.458 + 327.364)) / (102.691 / (102.691 + 333.745))
=0.21461919 / 0.23529452
=0.9121

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)
=(391.476 / 2027.759) / (348.897 / 1759.812)
=0.19305845 / 0.19825811
=0.9738

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)
=((764.205 + 376.521) / 2946.476) / ((863.583 + 413.879) / 3012.04)
=0.38714926 / 0.42411854
=0.9128

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
=(132.93 - 0 - 179.115) / 2946.476
=-0.0157

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.

Esterline Technologies Corp has a M-score of -2.50 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.

Esterline Technologies Corp Annual Data

Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Sep15Sep16
DSRI 1.04240.92380.95981.05221.06270.94840.9950.91181.15860.9872
GMI 1.00890.93491.02650.95250.98510.95090.96761.0621.05771.0009
AQI 1.0610.91311.1080.88221.21990.97480.970.96780.97740.9598
SGI 1.31141.22880.9491.08471.12541.0931.00581.0860.86511.123
DEPI 0.98310.83431.14631.02461.11580.80471.00090.87051.17690.99
SGAI 1.00210.97451.03711.01121.04641.05351.04080.91481.10051.015
LVGI 1.00450.98180.95351.0141.19320.89850.86230.96631.33410.9714
TATA -0.0139-0.0001-0.0159-0.0142-0.0173-0.0253-0.0261-0.0355-0.0244-0.0216
M-score -2.20-2.42-2.55-2.50-2.37-2.60-2.59-2.62-2.65-2.49

Esterline Technologies Corp Quarterly Data

Jan15Apr15Jul15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.99461.04431.0151.15861.13551.10571.17760.98720.93710.9252
GMI 1.07941.08851.07621.05771.05131.0411.04041.00090.98930.9628
AQI 0.92510.97950.98190.97741.01380.97270.95710.95980.960.949
SGI 1.04951.03771.01760.86510.87970.87960.89451.1231.13521.1523
DEPI 0.88170.9270.91531.17691.19011.20211.22670.990.95970.9121
SGAI 0.98391.03661.10661.10051.07031.05081.0391.0151.00670.9738
LVGI 1.15251.2621.39061.33411.11871.07730.99650.97140.96350.9128
TATA -0.0293-0.0388-0.0429-0.0244-0.0383-0.035-0.0317-0.0216-0.0202-0.0157
M-score -2.63-2.65-2.77-2.65-2.64-2.65-2.53-2.49-2.53-2.50
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