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GuruFocus has detected 3 Warning Signs with TE Connectivity Ltd $TEL.
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TE Connectivity Ltd (NYSE:TEL)
Beneish M-Score
-2.31 (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.

TE Connectivity Ltd has a M-score of -2.31 suggests that the company is not a manipulator.

TEL' s Beneish M-Score Range Over the Past 10 Years
Min: -4.25   Max: -2.07
Current: -2.31

-4.25
-2.07

During the past 13 years, the highest Beneish M-Score of TE Connectivity Ltd was -2.07. The lowest was -4.25. And the median was -2.62.


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 TE Connectivity Ltd 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 * 0.9992+0.528 * 0.9783+0.404 * 1.0229+0.892 * 1.072+0.115 * 1.0305
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0018+4.679 * 0.0245-0.327 * 1.014
=-2.31

* 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 $2,244 Mil.
Revenue was 3227 + 3063 + 3332 + 3121 = $12,743 Mil.
Gross Profit was 1108 + 1065 + 1104 + 1022 = $4,299 Mil.
Total Current Assets was $5,146 Mil.
Total Assets was $18,056 Mil.
Property, Plant and Equipment(Net PPE) was $3,046 Mil.
Depreciation, Depletion and Amortization(DDA) was $607 Mil.
Selling, General & Admin. Expense(SGA) was $1,540 Mil.
Total Current Liabilities was $3,935 Mil.
Long-Term Debt was $3,073 Mil.
Net Income was 405 + 409 + 437 + 839 = $2,090 Mil.
Non Operating Income was -2 + 0 + -1 + -651 = $-654 Mil.
Cash Flow from Operations was 521 + 404 + 684 + 693 = $2,302 Mil.
Accounts Receivable was $2,095 Mil.
Revenue was 2952 + 2833 + 2984 + 3118 = $11,887 Mil.
Gross Profit was 962 + 945 + 968 + 1048 = $3,923 Mil.
Total Current Assets was $5,414 Mil.
Total Assets was $17,841 Mil.
Property, Plant and Equipment(Net PPE) was $2,899 Mil.
Depreciation, Depletion and Amortization(DDA) was $599 Mil.
Selling, General & Admin. Expense(SGA) was $1,434 Mil.
Total Current Liabilities was $3,097 Mil.
Long-Term Debt was $3,732 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)
=(2244 / 12743) / (2095 / 11887)
=0.17609668 / 0.17624295
=0.9992

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)
=(3923 / 11887) / (4299 / 12743)
=0.3300244 / 0.33736169
=0.9783

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 - (5146 + 3046) / 18056) / (1 - (5414 + 2899) / 17841)
=0.5463004 / 0.53405078
=1.0229

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
=12743 / 11887
=1.072

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))
=(599 / (599 + 2899)) / (607 / (607 + 3046))
=0.17124071 / 0.1661648
=1.0305

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)
=(1540 / 12743) / (1434 / 11887)
=0.12085066 / 0.12063599
=1.0018

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)
=((3073 + 3935) / 18056) / ((3732 + 3097) / 17841)
=0.38812583 / 0.38277002
=1.014

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
=(2090 - -654 - 2302) / 18056
=0.0245

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.

TE Connectivity Ltd has a M-score of -2.31 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.

TE Connectivity Ltd Annual Data

Sep07Sep08Sep09Sep10Sep11Sep12Sep13Sep14Sep15Sep16
DSRI 0.90411.0570.97190.90171.04521.15620.81091.04780.9647
GMI 0.94241.10110.79021.00921.01790.95030.9620.99731.0138
AQI 1.130.93020.95120.98571.15810.97990.85161.14651.1689
SGI 1.09370.70351.17691.14920.95750.85761.09190.98361.0004
DEPI 0.95350.97780.92511.00830.95561.10050.91210.91121.0831
SGAI 0.90431.23160.92820.9851.01080.99661.03160.94270.9723
LVGI 0.75131.01551.10251.01031.01210.97191.07010.93671.1431
TATA 0.0105-0.2836-0.0443-0.0317-0.0458-0.0318-0.01810.02730.0408
M-score -2.32-4.04-2.72-2.59-2.63-2.63-2.78-2.24-2.28

TE Connectivity Ltd Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.97960.8010.77281.04780.8091.03341.02340.96471.04390.9992
GMI 0.98040.98730.98610.99730.99691.01261.02351.01381.00230.9783
AQI 1.12741.01061.02091.14650.93981.10851.1461.16891.09111.0229
SGI 1.04991.08841.12960.98360.98820.96820.9651.00041.03751.072
DEPI 0.9440.79510.7880.91120.87980.99071.01311.08311.03021.0305
SGAI 0.99241.00491.00890.94270.95740.95370.94130.97230.98831.0018
LVGI 1.0881.07331.1010.93670.97141.02891.10661.14311.06711.014
TATA -0.00270.01260.00310.02730.0140.01550.07840.04080.04370.0245
M-score -2.46-2.58-2.62-2.24-2.62-2.36-2.07-2.28-2.18-2.31
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