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GuruFocus has detected 2 Warning Signs with Freeport-McMoRan Inc $FCX.
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Freeport-McMoRan Inc (NYSE:FCX)
Beneish M-Score
-1.27 (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.

Freeport-McMoRan Inc has a M-score of -1.27 signals that the company is a manipulator.

FCX' s Beneish M-Score Range Over the Past 10 Years
Min: -5.83   Max: 2.14
Current: -1.27

-5.83
2.14

During the past 13 years, the highest Beneish M-Score of Freeport-McMoRan Inc was 2.14. The lowest was -5.83. And the median was -2.51.


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 Freeport-McMoRan 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 * 1.5118+0.528 * 4.667+0.404 * 0.5574+0.892 * 1.0084+0.115 * 1.0038
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0765+4.679 * -0.2173-0.327 * 0.992
=-1.27

* 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 $1,215 Mil.
Revenue was 4377 + 3877 + 3334 + 3527 = $15,115 Mil.
Gross Profit was 1035 + 466 + -545 + -3707 = $-2,751 Mil.
Total Current Assets was $10,435 Mil.
Total Assets was $37,317 Mil.
Property, Plant and Equipment(Net PPE) was $23,293 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,610 Mil.
Selling, General & Admin. Expense(SGA) was $609 Mil.
Total Current Liabilities was $4,265 Mil.
Long-Term Debt was $14,795 Mil.
Net Income was 131 + 217 + -479 + -4173 = $-4,304 Mil.
Non Operating Income was -30 + 5 + 64 + 38 = $77 Mil.
Cash Flow from Operations was 1135 + 980 + 874 + 740 = $3,729 Mil.
Accounts Receivable was $797 Mil.
Revenue was 3516 + 3382 + 3938 + 4153 = $14,989 Mil.
Gross Profit was -3919 + -3779 + -2232 + -2802 = $-12,732 Mil.
Total Current Assets was $7,462 Mil.
Total Assets was $46,577 Mil.
Property, Plant and Equipment(Net PPE) was $31,079 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,497 Mil.
Selling, General & Admin. Expense(SGA) was $561 Mil.
Total Current Liabilities was $4,307 Mil.
Long-Term Debt was $19,675 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)
=(1215 / 15115) / (797 / 14989)
=0.08038372 / 0.05317233
=1.5118

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)
=(-12732 / 14989) / (-2751 / 15115)
=-0.84942291 / -0.18200463
=4.667

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 - (10435 + 23293) / 37317) / (1 - (7462 + 31079) / 46577)
=0.09617601 / 0.17253151
=0.5574

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
=15115 / 14989
=1.0084

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))
=(3497 / (3497 + 31079)) / (2610 / (2610 + 23293))
=0.10113952 / 0.10076053
=1.0038

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)
=(609 / 15115) / (561 / 14989)
=0.0402911 / 0.03742745
=1.0765

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)
=((14795 + 4265) / 37317) / ((19675 + 4307) / 46577)
=0.51075917 / 0.51488932
=0.992

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
=(-4304 - 77 - 3729) / 37317
=-0.2173

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.

Freeport-McMoRan Inc has a M-score of -1.27 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.

Freeport-McMoRan Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.86380.46583.27611.1080.41881.29021.34720.69530.87941.5015
GMI 1.32821.56320.58980.90621.06141.33211.19213.9865-0.08594.7286
AQI 8.56240.40781.00441.02730.62911.98620.82190.73332.44820.5574
SGI 2.92511.05060.84511.26211.10.86251.16160.9560.73031.0153
DEPI 1.44360.46271.59571.12851.20350.90870.95410.71190.77381.0038
SGAI 1.01470.54951.4120.94040.99021.20411.31230.92341.31731.0715
LVGI 0.89641.64550.80280.79850.70420.96012.0461.0121.28320.992
TATA -0.0816-0.6176-0.0595-0.0627-0.0639-0.0167-0.0558-0.1194-0.331-0.2176
M-score 2.04-5.95-0.96-2.39-3.22-1.87-2.65-1.91-4.54-1.24

Freeport-McMoRan Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.9160.69531.12131.05671.19250.8570.53420.44780.49851.5118
GMI 1.10593.9865-2.1039-0.8192-0.3626-0.08870.14160.40831.36964.667
AQI 1.52640.73330.76040.77320.86672.44821.43011.21410.60350.5574
SGI 1.12990.9560.8990.77960.69140.74940.74930.78240.93341.0084
DEPI 0.54880.71190.81370.92330.85280.77380.8520.80940.96061.0038
SGAI 1.00780.92340.98131.13831.20421.29071.21881.22551.07131.0765
LVGI 0.93121.0121.09441.17481.28551.28321.30871.21511.12050.992
TATA -0.0737-0.1194-0.169-0.2137-0.2919-0.3308-0.4024-0.3785-0.2847-0.2173
M-score -2.55-1.91-5.03-4.77-4.86-4.54-5.45-5.31-4.35-1.27
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