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GuruFocus has detected 3 Warning Signs with Twin Disc Inc $TWIN.
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Twin Disc Inc (NAS:TWIN)
Beneish M-Score
-3.07 (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.

Twin Disc Inc has a M-score of -3.07 suggests that the company is not a manipulator.

TWIN' s Beneish M-Score Range Over the Past 10 Years
Min: -3.31   Max: -1.93
Current: -3.07

-3.31
-1.93

During the past 13 years, the highest Beneish M-Score of Twin Disc Inc was -1.93. The lowest was -3.31. And the median was -2.57.


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 Twin Disc 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 * 1.0014+0.528 * 0.9461+0.404 * 1.2103+0.892 * 0.8234+0.115 * 1.0711
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0508+4.679 * -0.1007-0.327 * 1.0488
=-3.07

* 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 $26.9 Mil.
Revenue was 45.084 + 33.672 + 35.835 + 42.647 = $157.2 Mil.
Gross Profit was 13.294 + 8.949 + 9.173 + 11.182 = $42.6 Mil.
Total Current Assets was $124.8 Mil.
Total Assets was $209.7 Mil.
Property, Plant and Equipment(Net PPE) was $47.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $7.6 Mil.
Selling, General & Admin. Expense(SGA) was $52.0 Mil.
Total Current Liabilities was $40.5 Mil.
Long-Term Debt was $9.0 Mil.
Net Income was -1.849 + -2.912 + -2.696 + -5.518 = $-13.0 Mil.
Non Operating Income was 0.067 + 0.456 + -0.11 + -0.16 = $0.3 Mil.
Cash Flow from Operations was 1.597 + 0.222 + -2.661 + 8.726 = $7.9 Mil.
Accounts Receivable was $32.6 Mil.
Revenue was 41.434 + 44.829 + 37.373 + 67.334 = $191.0 Mil.
Gross Profit was 9.618 + 11.606 + 8.19 + 19.534 = $48.9 Mil.
Total Current Assets was $133.2 Mil.
Total Assets was $218.4 Mil.
Property, Plant and Equipment(Net PPE) was $53.2 Mil.
Depreciation, Depletion and Amortization(DDA) was $9.2 Mil.
Selling, General & Admin. Expense(SGA) was $60.1 Mil.
Total Current Liabilities was $40.9 Mil.
Long-Term Debt was $8.2 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)
=(26.915 / 157.238) / (32.644 / 190.97)
=0.17117363 / 0.17093784
=1.0014

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)
=(48.948 / 190.97) / (42.598 / 157.238)
=0.25631251 / 0.27091416
=0.9461

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 - (124.821 + 47.679) / 209.736) / (1 - (133.194 + 53.178) / 218.41)
=0.17753748 / 0.14668742
=1.2103

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
=157.238 / 190.97
=0.8234

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))
=(9.158 / (9.158 + 53.178)) / (7.579 / (7.579 + 47.679))
=0.1469135 / 0.13715661
=1.0711

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)
=(51.98 / 157.238) / (60.082 / 190.97)
=0.33058167 / 0.31461486
=1.0508

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)
=((8.977 + 40.532) / 209.736) / ((8.227 + 40.931) / 218.41)
=0.2360539 / 0.22507211
=1.0488

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
=(-12.975 - 0.253 - 7.884) / 209.736
=-0.1007

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.

Twin Disc Inc has a M-score of -3.07 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.

Twin Disc Inc Annual Data

Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15Jun16
DSRI 0.86721.02180.88571.04721.03970.9070.9110.93841.08340.9238
GMI 0.94251.02621.14761.03670.7661.0151.21840.95830.9371.2796
AQI 0.86190.97021.28591.18790.75630.85170.91540.82090.94751.8418
SGI 1.30381.04570.89120.76971.36421.14650.80160.92511.00710.6256
DEPI 0.9811.08790.80460.89661.10240.9380.94150.9860.98471.0437
SGAI 0.97821.00291.02261.22220.94030.87371.15881.07310.94661.4206
LVGI 0.91450.99020.88870.86911.0160.8810.97420.88241.00160.7748
TATA 0.01620.0186-0.0022-0.13650.01680.0363-0.0741-0.0829-0.0271-0.0751
M-score -2.31-2.32-2.49-3.19-2.25-2.26-3.03-3.06-2.57-2.74

Twin Disc Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.17541.04431.08340.88031.06631.30140.92381.19090.92611.0014
GMI 0.93220.91760.9371.04251.09571.21931.27961.14431.09370.9461
AQI 0.7840.79750.94751.3961.37951.60121.84181.33831.51731.2103
SGI 0.99261.02161.00710.90860.77440.7020.62560.69120.72970.8234
DEPI 0.95790.95740.98471.01291.04681.06571.04371.03961.03891.0711
SGAI 1.00610.96780.94661.03231.18661.29831.42051.23641.16231.0508
LVGI 0.9850.9631.00160.92980.94310.8350.77480.81780.8161.0488
TATA -0.0247-0.0461-0.0271-0.0518-0.0299-0.0137-0.0751-0.0653-0.0864-0.1007
M-score -2.56-2.75-2.57-2.71-2.56-2.16-2.74-2.65-2.90-3.07
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