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GuruFocus has detected 2 Warning Signs with Encana Corp $ECA.
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Encana Corp (NYSE:ECA)
Beneish M-Score
-2.22 (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.

Encana Corp has a M-score of -2.15 signals that the company is a manipulator.

ECA' s Beneish M-Score Range Over the Past 10 Years
Min: -4.58   Max: -2.19
Current: -2.22

-4.58
-2.19

During the past 13 years, the highest Beneish M-Score of Encana Corp was -2.19. The lowest was -4.58. And the median was -2.83.


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 Encana 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 * 1.9883+0.528 * 1.7801+0.404 * 1.1788+0.892 * 0.6599+0.115 * 1.3739
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.7028+4.679 * -0.152-0.327 * 0.9206
=-2.15

* 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 $555 Mil.
Revenue was 822 + 979 + 364 + 753 = $2,918 Mil.
Gross Profit was 221 + 415 + -124 + 222 = $734 Mil.
Total Current Assets was $1,923 Mil.
Total Assets was $14,653 Mil.
Property, Plant and Equipment(Net PPE) was $8,139 Mil.
Depreciation, Depletion and Amortization(DDA) was $859 Mil.
Selling, General & Admin. Expense(SGA) was $309 Mil.
Total Current Liabilities was $1,562 Mil.
Long-Term Debt was $4,502 Mil.
Net Income was -281 + 317 + -601 + -379 = $-944 Mil.
Non Operating Income was 1325 + 338 + -546 + -459 = $658 Mil.
Cash Flow from Operations was 199 + 186 + 83 + 157 = $625 Mil.
Accounts Receivable was $423 Mil.
Revenue was 1031 + 1312 + 830 + 1249 = $4,422 Mil.
Gross Profit was 468 + 716 + 216 + 580 = $1,980 Mil.
Total Current Assets was $1,607 Mil.
Total Assets was $15,614 Mil.
Property, Plant and Equipment(Net PPE) was $9,857 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,488 Mil.
Selling, General & Admin. Expense(SGA) was $275 Mil.
Total Current Liabilities was $1,333 Mil.
Long-Term Debt was $5,686 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)
=(555 / 2918) / (423 / 4422)
=0.19019877 / 0.09565807
=1.9883

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)
=(1980 / 4422) / (734 / 2918)
=0.44776119 / 0.25154215
=1.7801

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 - (1923 + 8139) / 14653) / (1 - (1607 + 9857) / 15614)
=0.31331468 / 0.26578711
=1.1788

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
=2918 / 4422
=0.6599

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))
=(1488 / (1488 + 9857)) / (859 / (859 + 8139))
=0.1311591 / 0.09546566
=1.3739

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)
=(309 / 2918) / (275 / 4422)
=0.10589445 / 0.06218905
=1.7028

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)
=((4502 + 1562) / 14653) / ((5686 + 1333) / 15614)
=0.41384017 / 0.44953247
=0.9206

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
=(-944 - 658 - 625) / 14653
=-0.152

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.

Encana Corp has a M-score of -2.15 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.

Encana Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.04550.62161.55661.17120.92321.49570.8531.03620.63031.9883
GMI 1.54120.62281.1610.87661.02511.26731.03240.90581.24071.7801
AQI 1.561.45220.26671.31851.76291.45351.01410.79131.78391.1788
SGI 1.32330.97020.52790.79810.95460.60941.13531.36890.55140.6599
DEPI 1.03310.85670.90551.8960.52550.74481.23841.52770.67331.3739
SGAI 1.07081.19982.02140.95091.01291.83780.98650.54411.52511.7028
LVGI 1.33440.6861.30440.83371.63471.09971.04150.75461.09280.9206
TATA -0.1043-0.0729-0.1762-0.0069-0.1609-0.0673-0.0941-0.0908-0.3683-0.152
M-score -2.24-3.16-3.71-2.31-3.29-2.57-2.90-2.46-4.66-2.15

Encana Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.39581.03620.68330.59430.74750.63031.22321.60961.49281.9883
GMI 1.05320.90581.00750.99821.03091.24071.3081.37311.60871.7801
AQI 0.53040.79130.87271.15312.2751.78391.87341.74741.4571.1788
SGI 1.19011.36891.10241.05130.78530.55140.53230.52280.55390.6599
DEPI 0.99351.52771.30371.06521.11630.67330.86381.03651.19131.3739
SGAI 1.00370.54410.60410.58390.80311.52511.78391.75051.89711.7028
LVGI 0.7570.75460.84630.93271.20911.09281.10661.19410.85040.9206
TATA -0.1366-0.0903-0.0544-0.01470.0571-0.3683-0.4085-0.432-0.4799-0.152
M-score -2.67-2.45-2.83-2.71-2.13-4.66-4.27-4.06-4.25-2.15
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