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GuruFocus has detected 7 Warning Signs with Chesapeake Energy Corp $CHK.
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Chesapeake Energy Corp (NYSE:CHK)
Beneish M-Score
-3.95 (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.

Chesapeake Energy Corp has a M-score of -3.95 suggests that the company is not a manipulator.

CHK' s Beneish M-Score Range Over the Past 10 Years
Min: -5.67   Max: 3.07
Current: -3.95

-5.67
3.07

During the past 13 years, the highest Beneish M-Score of Chesapeake Energy Corp was 3.07. The lowest was -5.67. And the median was -2.79.


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 Chesapeake Energy 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 * 1.9569+0.528 * 0.5192+0.404 * 0.6868+0.892 * 0.6167+0.115 * 1.4274
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.8692+4.679 * -0.3428-0.327 * 1.2901
=-3.95

* 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 $840 Mil.
Revenue was 2021 + 2276 + 1622 + 1953 = $7,872 Mil.
Gross Profit was -3354 + 1622 + -267 + 305 = $-1,694 Mil.
Total Current Assets was $2,142 Mil.
Total Assets was $13,028 Mil.
Property, Plant and Equipment(Net PPE) was $10,609 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,107 Mil.
Selling, General & Admin. Expense(SGA) was $-1,909 Mil.
Total Current Liabilities was $3,648 Mil.
Long-Term Debt was $9,938 Mil.
Net Income was -575 + -1155 + -1750 + -921 = $-4,401 Mil.
Non Operating Income was 22 + 85 + 69 + 93 = $269 Mil.
Cash Flow from Operations was -254 + 376 + 95 + -421 = $-204 Mil.
Accounts Receivable was $696 Mil.
Revenue was 2649 + 3376 + 3521 + 3218 = $12,764 Mil.
Gross Profit was -5403 + 2617 + 627 + 733 = $-1,426 Mil.
Total Current Assets was $2,480 Mil.
Total Assets was $17,314 Mil.
Property, Plant and Equipment(Net PPE) was $14,298 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,229 Mil.
Selling, General & Admin. Expense(SGA) was $-3,561 Mil.
Total Current Liabilities was $3,685 Mil.
Long-Term Debt was $10,311 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)
=(840 / 7872) / (696 / 12764)
=0.10670732 / 0.05452836
=1.9569

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)
=(-1426 / 12764) / (-1694 / 7872)
=-0.11172046 / -0.21519309
=0.5192

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 - (2142 + 10609) / 13028) / (1 - (2480 + 14298) / 17314)
=0.0212619 / 0.03095761
=0.6868

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
=7872 / 12764
=0.6167

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))
=(2229 / (2229 + 14298)) / (1107 / (1107 + 10609))
=0.13487021 / 0.09448617
=1.4274

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)
=(-1909 / 7872) / (-3561 / 12764)
=-0.24250508 / -0.27898778
=0.8692

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)
=((9938 + 3648) / 13028) / ((10311 + 3685) / 17314)
=1.04283083 / 0.80836317
=1.2901

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
=(-4401 - 269 - -204) / 13028
=-0.3428

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.

Chesapeake Energy Corp has a M-score of -3.95 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.

Chesapeake Energy Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.19380.82691.5111.22511.02150.78180.62590.55010.9411.9569
GMI 1.10590.70561.61821.07931.18141.04891.32051.04851.59393.2124
AQI 0.58520.790.98481.62941.09890.79240.66040.79381.64260.6868
SGI 1.06471.49090.66231.2161.24231.05851.54921.2120.5520.6167
DEPI 0.95411.07531.06071.20080.95510.7070.96970.88130.611.4274
SGAI 1.176510.71520.13571.06740.97380.92230.55140.58131.32221.6559
LVGI 1.17560.97551.15090.91990.91871.05910.98240.93661.95961.2901
TATA -0.116-0.1181-0.3328-0.0926-0.0995-0.1058-0.0835-0.0611-0.9242-0.3415
M-score -2.99-4.65-3.44-2.18-2.55-3.22-2.61-2.97-7.10-2.66

Chesapeake Energy Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.75180.55010.6160.69980.66160.9411.05621.29931.42871.9569
GMI 1.27511.04831.06170.97870.8292-2.6491-1.7675-0.9372-0.77520.5192
AQI 0.65580.79380.90511.44971.93191.64262.17761.68620.92030.6868
SGI 1.3341.21191.02870.92850.78760.5520.53990.48820.49020.6167
DEPI 0.99020.88130.76310.6980.54760.610.78010.95641.33481.4274
SGAI 0.60320.58140.68230.73028.061-20.036-22.1072-26.3584-3.90810.8692
LVGI 0.97450.93661.06491.30891.68621.95961.80511.66561.40931.2901
TATA -0.0786-0.0611-0.1668-0.3207-0.6403-0.9247-0.8102-0.738-0.5309-0.3428
M-score -2.70-2.97-3.59-4.24-7.18-5.67-3.93-2.38-5.25-3.95
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