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GuruFocus has detected 5 Warning Signs with Eastman Chemical Co $EMN.
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Eastman Chemical Co (NYSE:EMN)
Beneish M-Score
-2.56 (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.

Eastman Chemical Co has a M-score of -2.56 suggests that the company is not a manipulator.

EMN' s Beneish M-Score Range Over the Past 10 Years
Min: -3.23   Max: -1.65
Current: -2.56

-3.23
-1.65

During the past 13 years, the highest Beneish M-Score of Eastman Chemical Co was -1.65. The lowest was -3.23. And the median was -2.69.


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 Eastman Chemical Co 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 * 1.0981+0.528 * 1.025+0.404 * 0.9737+0.892 * 0.9337+0.115 * 1.0112
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9817+4.679 * -0.0292-0.327 * 0.9464
=-2.56

* 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 $812 Mil.
Revenue was 2188 + 2287 + 2297 + 2236 = $9,008 Mil.
Gross Profit was 490 + 621 + 605 + 634 = $2,350 Mil.
Total Current Assets was $2,866 Mil.
Total Assets was $15,457 Mil.
Property, Plant and Equipment(Net PPE) was $5,276 Mil.
Depreciation, Depletion and Amortization(DDA) was $580 Mil.
Selling, General & Admin. Expense(SGA) was $703 Mil.
Total Current Liabilities was $1,795 Mil.
Long-Term Debt was $6,311 Mil.
Net Income was 116 + 232 + 255 + 251 = $854 Mil.
Non Operating Income was -75 + -3 + 11 + -12 = $-79 Mil.
Cash Flow from Operations was 394 + 450 + 494 + 47 = $1,385 Mil.
Accounts Receivable was $792 Mil.
Revenue was 2225 + 2447 + 2533 + 2443 = $9,648 Mil.
Gross Profit was 509 + 695 + 720 + 656 = $2,580 Mil.
Total Current Assets was $2,878 Mil.
Total Assets was $15,580 Mil.
Property, Plant and Equipment(Net PPE) was $5,130 Mil.
Depreciation, Depletion and Amortization(DDA) was $571 Mil.
Selling, General & Admin. Expense(SGA) was $767 Mil.
Total Current Liabilities was $2,056 Mil.
Long-Term Debt was $6,577 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)
=(812 / 9008) / (792 / 9648)
=0.0901421 / 0.08208955
=1.0981

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)
=(2580 / 9648) / (2350 / 9008)
=0.26741294 / 0.26087922
=1.025

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 - (2866 + 5276) / 15457) / (1 - (2878 + 5130) / 15580)
=0.47324837 / 0.4860077
=0.9737

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
=9008 / 9648
=0.9337

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))
=(571 / (571 + 5130)) / (580 / (580 + 5276))
=0.10015787 / 0.09904372
=1.0112

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)
=(703 / 9008) / (767 / 9648)
=0.07804174 / 0.07949834
=0.9817

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)
=((6311 + 1795) / 15457) / ((6577 + 2056) / 15580)
=0.52442259 / 0.55410783
=0.9464

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
=(854 - -79 - 1385) / 15457
=-0.0292

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.

Eastman Chemical Co has a M-score of -2.56 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.

Eastman Chemical Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.79460.51151.54121.48050.94381.18590.90131.04390.83551.0981
GMI 1.06921.04250.71310.941.14251.00510.73251.27350.87181.025
AQI 1.3850.86320.97210.99011.04193.29120.96511.22110.99990.9737
SGI 1.00750.98480.65361.32891.22871.12871.1541.01891.01270.9337
DEPI 0.8851.33740.95171.01180.99081.01880.86471.12810.81141.0112
SGAI 0.98551.0131.34010.88990.9021.18620.86791.14881.00840.9766
LVGI 1.02390.97381.01231.02250.92841.26770.92121.19360.96070.9464
TATA -0.0766-0.0543-0.1104-0.00420.0002-0.0583-0.0109-0.0434-0.0503-0.0292
M-score -2.85-3.18-3.04-1.79-2.20-1.66-2.61-2.47-2.93-2.56

Eastman Chemical Co Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.99821.04390.96720.91710.94970.83550.97550.98541.01011.0981
GMI 0.87771.27351.24821.21241.15450.87180.87140.90730.93931.025
AQI 0.99691.22111.23871.20961.19520.99990.99520.99070.99030.9737
SGI 1.02041.01891.03391.03951.03481.01270.97680.94530.92560.9337
DEPI 1.02691.12811.01410.96230.92290.81140.90060.9380.98381.0112
SGAI 0.86251.14881.15551.19721.19821.00321.02771.00561.00890.9817
LVGI 1.00151.19361.15941.13291.13180.96070.94180.94820.94510.9464
TATA -0.0318-0.0434-0.0561-0.0659-0.0498-0.0503-0.0408-0.0381-0.0458-0.0292
M-score -2.65-2.47-2.59-2.71-2.65-2.93-2.78-2.76-2.77-2.56
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