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GuruFocus has detected 4 Warning Signs with AK Steel Holding Corp $AKS.
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AK Steel Holding Corp (NYSE:AKS)
Beneish M-Score
-2.90 (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.

AK Steel Holding Corp has a M-score of -2.90 suggests that the company is not a manipulator.

AKS' s Beneish M-Score Range Over the Past 10 Years
Min: -3.87   Max: -0.82
Current: -2.9

-3.87
-0.82

During the past 13 years, the highest Beneish M-Score of AK Steel Holding Corp was -0.82. The lowest was -3.87. And the median was -2.59.


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 AK Steel Holding Corp 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 * 1.1303+0.528 * 0.7103+0.404 * 1.0447+0.892 * 0.8789+0.115 * 0.9771
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.03+4.679 * -0.0762-0.327 * 0.799
=-2.90

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Accounts Receivable was $442 Mil.
Revenue was 1418.6 + 1452.9 + 1492.2 + 1518.8 = $5,883 Mil.
Gross Profit was 238.5 + 258.8 + 167.2 + 153.3 = $818 Mil.
Total Current Assets was $1,824 Mil.
Total Assets was $4,036 Mil.
Property, Plant and Equipment(Net PPE) was $2,014 Mil.
Depreciation, Depletion and Amortization(DDA) was $235 Mil.
Selling, General & Admin. Expense(SGA) was $313 Mil.
Total Current Liabilities was $865 Mil.
Long-Term Debt was $1,817 Mil.
Net Income was -62.4 + 50.9 + 17.3 + -13.6 = $-8 Mil.
Non Operating Income was 0.7 + -7 + 2.1 + -0.7 = $-5 Mil.
Cash Flow from Operations was 16.7 + 14.9 + 136.3 + 136.7 = $305 Mil.
Accounts Receivable was $445 Mil.
Revenue was 1542.7 + 1709.9 + 1689.4 + 1750.9 = $6,693 Mil.
Gross Profit was 222.9 + 185.5 + 110.2 + 142.3 = $661 Mil.
Total Current Assets was $1,806 Mil.
Total Assets was $4,084 Mil.
Property, Plant and Equipment(Net PPE) was $2,087 Mil.
Depreciation, Depletion and Amortization(DDA) was $237 Mil.
Selling, General & Admin. Expense(SGA) was $346 Mil.
Total Current Liabilities was $1,043 Mil.
Long-Term Debt was $2,354 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)
=(442 / 5882.5) / (444.9 / 6692.9)
=0.07513812 / 0.06647343
=1.1303

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)
=(660.9 / 6692.9) / (817.8 / 5882.5)
=0.09874643 / 0.13902252
=0.7103

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 - (1823.7 + 2014.4) / 4036) / (1 - (1806.2 + 2086.5) / 4084.4)
=0.0490337 / 0.04693468
=1.0447

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
=5882.5 / 6692.9
=0.8789

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))
=(237.2 / (237.2 + 2086.5)) / (235 / (235 + 2014.4))
=0.10207858 / 0.1044723
=0.9771

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)
=(313.4 / 5882.5) / (346.2 / 6692.9)
=0.05327667 / 0.05172646
=1.03

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)
=((1816.6 + 865.3) / 4036) / ((2354.1 + 1042.6) / 4084.4)
=0.66449455 / 0.83162766
=0.799

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
=(-7.8 - -4.9 - 304.6) / 4036
=-0.0762

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.

AK Steel Holding Corp has a M-score of -2.90 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.

AK Steel Holding Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.83950.63771.84790.71211.07830.91561.18051.05040.67121.1303
GMI 0.6561.02611.87961.47340.81711.00250.80081.08490.77520.7103
AQI 0.89410.97331.18521.14681.25950.50821.09291.08430.3451.0447
SGI 1.15391.09160.53331.4641.08370.91740.93881.16791.02880.8789
DEPI 0.94010.98610.95131.03821.12550.89890.93971.0970.89420.9771
SGAI 0.93260.91651.6160.72312.1870.74560.44030.98152.04771.0392
LVGI 0.84320.93341.0791.13321.12511.41861.1381.13331.13190.799
TATA -0.0612-0.0172-0.03330.00270.0068-0.19540.0180.0512-0.1011-0.0762
M-score -2.95-2.77-1.87-2.00-2.52-3.85-2.31-1.99-3.85-2.90

AK Steel Holding Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.22061.05040.93570.7730.65050.67120.90480.88721.05651.1303
GMI 0.92571.08490.81650.86090.88420.77520.82880.71940.64870.7103
AQI 1.05141.08430.61360.50630.50090.3450.62871.30790.76521.0447
SGI 1.08031.16791.23081.23141.19671.02880.940.89080.84030.8789
DEPI 1.14571.0971.06781.03960.83830.89420.9380.97881.02170.9771
SGAI 0.25280.98151.19081.73412.04542.14752.09181.83662.01191.03
LVGI 1.13361.13331.13621.08361.11981.13191.05210.9390.91650.799
TATA 0.0440.05120.0385-0.0389-0.08-0.1011-0.1334-0.1278-0.0877-0.0762
M-score -1.92-1.99-2.48-3.09-3.50-3.87-3.70-3.43-3.41-2.90
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