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GuruFocus has detected 2 Warning Signs with Trinity Industries Inc $TRN.
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Trinity Industries Inc (NYSE:TRN)
Beneish M-Score
-2.52 (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.

Trinity Industries Inc has a M-score of -2.52 suggests that the company is not a manipulator.

TRN' s Beneish M-Score Range Over the Past 10 Years
Min: -3.95   Max: -1.3
Current: -2.52

-3.95
-1.3

During the past 13 years, the highest Beneish M-Score of Trinity Industries Inc was -1.30. The lowest was -3.95. And the median was -2.51.


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 Trinity Industries 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 * 1.6016+0.528 * 1.1058+0.404 * 0.9555+0.892 * 0.7185+0.115 * 1.0426
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.2118+4.679 * -0.08-0.327 * 0.9096
=-2.52

* 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 $457 Mil.
Revenue was 877.3 + 1103.8 + 1111.7 + 1184.9 = $4,278 Mil.
Gross Profit was 217.6 + 262.6 + 284.4 + 287.2 = $1,052 Mil.
Total Current Assets was $2,051 Mil.
Total Assets was $9,143 Mil.
Property, Plant and Equipment(Net PPE) was $6,080 Mil.
Depreciation, Depletion and Amortization(DDA) was $286 Mil.
Selling, General & Admin. Expense(SGA) was $413 Mil.
Total Current Liabilities was $555 Mil.
Long-Term Debt was $3,036 Mil.
Net Income was 46 + 67.6 + 84.2 + 94.6 = $292 Mil.
Non Operating Income was -0.8 + -4.3 + -0.2 + 4.9 = $-0 Mil.
Cash Flow from Operations was 220.1 + 298.1 + 305.7 + 200.3 = $1,024 Mil.
Accounts Receivable was $397 Mil.
Revenue was 1187.9 + 1547 + 1542.2 + 1676.8 = $5,954 Mil.
Gross Profit was 298 + 430.9 + 432.8 + 457.2 = $1,619 Mil.
Total Current Assets was $2,354 Mil.
Total Assets was $8,910 Mil.
Property, Plant and Equipment(Net PPE) was $5,524 Mil.
Depreciation, Depletion and Amortization(DDA) was $272 Mil.
Selling, General & Admin. Expense(SGA) was $475 Mil.
Total Current Liabilities was $676 Mil.
Long-Term Debt was $3,171 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)
=(456.7 / 4277.7) / (396.9 / 5953.9)
=0.10676298 / 0.06666219
=1.6016

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)
=(1618.9 / 5953.9) / (1051.8 / 4277.7)
=0.27190581 / 0.2458798
=1.1058

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 - (2051.4 + 6080.1) / 9143.4) / (1 - (2354.2 + 5523.5) / 8909.7)
=0.11066999 / 0.11582882
=0.9555

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
=4277.7 / 5953.9
=0.7185

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))
=(271.8 / (271.8 + 5523.5)) / (286.4 / (286.4 + 6080.1))
=0.04690007 / 0.04498547
=1.0426

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)
=(413.2 / 4277.7) / (474.6 / 5953.9)
=0.09659396 / 0.07971246
=1.2118

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)
=((3036 + 555) / 9143.4) / ((3171 + 676.1) / 8909.7)
=0.39274231 / 0.43178783
=0.9096

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
=(292.4 - -0.4 - 1024.2) / 9143.4
=-0.08

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.

Trinity Industries Inc has a M-score of -2.52 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.

Trinity Industries Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.98621.16520.73671.86731.05920.7790.83450.88060.9671.4412
GMI 0.94830.94871.09390.81921.15160.99090.83490.9510.92491.1008
AQI 0.91370.81990.70620.85590.73241.00660.97611.73020.97930.9484
SGI 1.19071.0130.66320.74971.52191.29731.14521.41341.03610.7177
DEPI 0.9611.21230.89151.19280.97591.00151.01560.89341.00141.0479
SGAI 0.92381.04791.15351.18670.77070.89041.13510.98031.13931.1915
LVGI 0.94030.98940.9791.20260.99190.97510.89941.00740.85350.8989
TATA -0.0163-0.0294-0.1769-0.01670.0058-0.0426-0.0396-0.0167-0.0167-0.0819
M-score -2.43-2.53-3.95-2.21-1.92-2.59-2.77-2.04-2.58-2.67

Trinity Industries Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.88060.99850.93760.80250.9670.77521.02461.08751.44121.6016
GMI 0.9510.99030.99890.97250.92490.91670.95261.00581.10081.1058
AQI 1.73021.53021.89190.93690.97930.93420.78180.93770.94840.9555
SGI 1.41341.2951.22881.12881.03610.93970.83670.77320.71770.7185
DEPI 0.89340.95580.93040.91881.00140.99971.03131.05151.04791.0426
SGAI 0.98031.0561.07331.0681.13931.20741.27891.27231.19151.2118
LVGI 1.00741.00240.94910.89420.85350.85640.87860.88440.89890.9096
TATA -0.0167-0.0112-0.0313-0.0441-0.0167-0.0457-0.0616-0.0692-0.0819-0.08
M-score -2.04-2.08-2.12-2.78-2.58-3.01-3.01-2.95-2.67-2.52
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