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GuruFocus has detected 3 Warning Signs with T. Rowe Price Group Inc $TROW.
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T. Rowe Price Group Inc (NAS:TROW)
Beneish M-Score
-1.95 (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.

T. Rowe Price Group Inc has a M-score of -1.95 signals that the company is a manipulator.

TROW' s Beneish M-Score Range Over the Past 10 Years
Min: -3.06   Max: -1.9
Current: -1.95

-3.06
-1.9

During the past 13 years, the highest Beneish M-Score of T. Rowe Price Group Inc was -1.90. The lowest was -3.06. And the median was -2.46.


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 T. Rowe Price Group 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 * 1.0817+0.528 * 0.9992+0.404 * 0.9234+0.892 * 1.0419+0.115 * 0.9713
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0155+4.679 * 0.1188-0.327 * 1.3122
=-1.95

* 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 $483 Mil.
Revenue was 1113.6 + 1091.2 + 1092.9 + 1044.7 = $4,342 Mil.
Gross Profit was 1033 + 1010.4 + 1010.9 + 968.3 = $4,023 Mil.
Total Current Assets was $2,063 Mil.
Total Assets was $6,276 Mil.
Property, Plant and Equipment(Net PPE) was $625 Mil.
Depreciation, Depletion and Amortization(DDA) was $137 Mil.
Selling, General & Admin. Expense(SGA) was $1,619 Mil.
Total Current Liabilities was $816 Mil.
Long-Term Debt was $0 Mil.
Net Income was 385.9 + 379.8 + 327.8 + 195.3 = $1,289 Mil.
Non Operating Income was 115 + 12.2 + 88.3 + 41.5 = $257 Mil.
Cash Flow from Operations was 188.5 + -97.7 + 299.7 + -104 = $287 Mil.
Accounts Receivable was $428 Mil.
Revenue was 994.1 + 1052.2 + 1049 + 1072.4 = $4,168 Mil.
Gross Profit was 918.8 + 974.2 + 970.6 + 993.9 = $3,858 Mil.
Total Current Assets was $1,751 Mil.
Total Assets was $6,204 Mil.
Property, Plant and Equipment(Net PPE) was $613 Mil.
Depreciation, Depletion and Amortization(DDA) was $129 Mil.
Selling, General & Admin. Expense(SGA) was $1,530 Mil.
Total Current Liabilities was $615 Mil.
Long-Term Debt was $0 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)
=(482.5 / 4342.4) / (428.1 / 4167.7)
=0.11111367 / 0.10271853
=1.0817

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)
=(3857.5 / 4167.7) / (4022.6 / 4342.4)
=0.92557046 / 0.92635409
=0.9992

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 - (2063.3 + 625.2) / 6275.6) / (1 - (1751 + 612.7) / 6203.9)
=0.57159475 / 0.61899773
=0.9234

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
=4342.4 / 4167.7
=1.0419

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))
=(129.4 / (129.4 + 612.7)) / (136.8 / (136.8 + 625.2))
=0.17437003 / 0.17952756
=0.9713

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)
=(1618.6 / 4342.4) / (1529.8 / 4167.7)
=0.37274318 / 0.36706097
=1.0155

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)
=((0 + 816.3) / 6275.6) / ((0 + 615) / 6203.9)
=0.13007521 / 0.09913119
=1.3122

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
=(1288.8 - 257 - 286.5) / 6275.6
=0.1188

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.

T. Rowe Price Group Inc has a M-score of -1.95 signals that the company is likely to 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.

T. Rowe Price Group Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.70371.57370.98660.85221.05630.97750.97150.95481.015
GMI 1.00711.00711.01020.93571.07880.99950.99961.00191.0006
AQI 1.00860.94761.01190.98561.08020.92331.04091.02431.1246
SGI 0.94970.88241.26761.16051.10031.15281.14291.05491.0053
DEPI 1.05621.09191.12360.89320.89790.9230.85340.92910.9663
SGAI 1.06991.04320.88271.13720.82590.94980.98871.02741.0278
LVGI 0.68110.84770.97820.9191.81710.50331.03351.52971.2588
TATA -0.0705-0.0278-0.0258-0.0528-0.0214-0.0494-0.0401-0.08050.1313
M-score -3.02-2.15-2.32-2.77-2.61-2.46-2.58-3.02-1.89

T. Rowe Price Group Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.97150.95240.95570.94970.95480.93110.95161.03271.0151.0817
GMI 0.99971.0011.0021.02690.96380.96460.96520.94571.00060.9992
AQI 1.04091.04141.09171.07431.02431.18841.13411.08771.12460.9234
SGI 1.14291.11911.10381.07231.05491.02790.99941.00311.00531.0419
DEPI 0.85340.90270.92740.94260.92910.91490.9330.95820.96630.9713
SGAI 0.9870.99891.01010.9581.14151.14891.15951.19721.02781.0155
LVGI 1.03352.06631.18711.20161.52970.61561.12011.02491.25881.3122
TATA -0.0401-0.0441-0.064-0.073-0.0805-0.00050.04510.06950.130.1188
M-score -2.58-2.97-2.76-2.82-3.06-2.37-2.35-2.16-1.90-1.95
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