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GuruFocus has detected 5 Warning Signs with Pentair PLC $PNR.
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Pentair PLC (NYSE:PNR)
Beneish M-Score
-2.94 (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.

Pentair PLC has a M-score of -2.94 suggests that the company is not a manipulator.

PNR' s Beneish M-Score Range Over the Past 10 Years
Min: -3.13   Max: -1.26
Current: -2.94

-3.13
-1.26

During the past 13 years, the highest Beneish M-Score of Pentair PLC was -1.26. The lowest was -3.13. 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 Pentair PLC 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 * 0.7122+0.528 * 0.9705+0.404 * 1.0624+0.892 * 1.0119+0.115 * 0.5004
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0473+4.679 * -0.0348-0.327 * 0.9569
=-2.94

* 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 $914 Mil.
Revenue was 1183.5 + 1188.1 + 1210.7 + 1733.3 = $5,316 Mil.
Gross Profit was 422.3 + 440.1 + 440.9 + 599.2 = $1,903 Mil.
Total Current Assets was $2,841 Mil.
Total Assets was $11,818 Mil.
Property, Plant and Equipment(Net PPE) was $552 Mil.
Depreciation, Depletion and Amortization(DDA) was $181 Mil.
Selling, General & Admin. Expense(SGA) was $1,082 Mil.
Total Current Liabilities was $1,398 Mil.
Long-Term Debt was $4,529 Mil.
Net Income was 87.8 + 131 + 141 + 142.8 = $503 Mil.
Non Operating Income was 0.2 + 209.5 + -67.4 + 1 = $143 Mil.
Cash Flow from Operations was -106 + 304.6 + 187.3 + 384.5 = $770 Mil.
Accounts Receivable was $1,269 Mil.
Revenue was 1190 + 1289 + 1112.8 + 1661.2 = $5,253 Mil.
Gross Profit was 431.3 + 432.5 + 394.7 + 566.2 = $1,825 Mil.
Total Current Assets was $3,006 Mil.
Total Assets was $12,030 Mil.
Property, Plant and Equipment(Net PPE) was $952 Mil.
Depreciation, Depletion and Amortization(DDA) was $134 Mil.
Selling, General & Admin. Expense(SGA) was $1,021 Mil.
Total Current Liabilities was $1,468 Mil.
Long-Term Debt was $4,837 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)
=(914.4 / 5315.6) / (1268.7 / 5253)
=0.17202197 / 0.24151913
=0.7122

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)
=(1824.7 / 5253) / (1902.5 / 5315.6)
=0.34736341 / 0.3579088
=0.9705

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 - (2841.1 + 551.9) / 11818) / (1 - (3005.9 + 951.8) / 12030.2)
=0.71289558 / 0.6710196
=1.0624

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
=5315.6 / 5253
=1.0119

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))
=(134.4 / (134.4 + 951.8)) / (181.3 / (181.3 + 551.9))
=0.12373412 / 0.24727223
=0.5004

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)
=(1081.8 / 5315.6) / (1020.8 / 5253)
=0.20351418 / 0.19432705
=1.0473

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)
=((4528.9 + 1397.6) / 11818) / ((4837.1 + 1467.6) / 12030.2)
=0.50148079 / 0.52407275
=0.9569

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
=(502.6 - 143.3 - 770.4) / 11818
=-0.0348

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.

Pentair PLC has a M-score of -2.94 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.

Pentair PLC Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.01170.97361.22881.0090.96551.97280.54321.46440.54031.0282
GMI 0.95741.0231.0380.94970.98861.05650.87880.96351.01020.957
AQI 1.05331.0161.01850.96320.99630.97641.00871.00531.12581.0028
SGI 1.08041.02640.80321.12561.14051.24591.6910.64081.18670.961
DEPI 0.97740.92350.84281.18010.93311.83680.5691.62170.59390.8614
SGAI 1.00891.06491.00660.9641.10661.29190.80851.00590.92331.0387
LVGI 1.08410.89450.89190.98411.34960.8131.02641.2291.19860.9556
TATA -0.0313-0.0349-0.0239-0.0129-0.0719-0.0066-0.0323-0.0776-0.075-0.0418
M-score -2.58-2.61-2.51-2.43-2.87-1.27-2.52-2.76-3.13-2.71

Pentair PLC Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.46441.40621.45961.84870.54030.87080.75360.41161.02820.7122
GMI 0.96350.99421.01741.02151.01021.00270.98520.97270.9570.9705
AQI 1.00531.01841.01731.10061.12581.06221.06751.03551.00281.0624
SGI 0.64080.62890.61590.52061.18671.16791.23131.47390.9611.0119
DEPI 1.62171.39921.36083.62840.59391.05210.84610.22170.86140.5004
SGAI 1.00591.02240.97921.02730.92330.92760.9780.94731.03871.0473
LVGI 1.2291.20621.14951.2071.19861.14581.13720.95430.95560.9569
TATA -0.0776-0.0658-0.0618-0.0209-0.075-0.0841-0.0922-0.088-0.0418-0.0348
M-score -2.76-2.77-2.68-1.94-3.13-2.85-2.97-3.08-2.71-2.94
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