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GuruFocus has detected 4 Warning Signs with Freeport-McMoRan Inc $FCX.
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Freeport-McMoRan Inc (NYSE:FCX)
Beneish M-Score
-1.41 (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 -4.37 suggests that the company is not a manipulator.

FCX' s Beneish M-Score Range Over the Past 10 Years
Min: -5.83   Max: 2.14
Current: -1.41

-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 * 0.5008+0.528 * 1.3399+0.404 * 0.6035+0.892 * 0.9291+0.115 * 0.9606
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0743+4.679 * -0.2848-0.327 * 1.1205
=-4.37

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

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Accounts Receivable was $885 Mil.
Revenue was 3877 + 3334 + 3527 + 4786 = $15,524 Mil.
Gross Profit was 466 + -545 + -3707 + -3758 = $-7,544 Mil.
Total Current Assets was $11,505 Mil.
Total Assets was $41,400 Mil.
Property, Plant and Equipment(Net PPE) was $27,761 Mil.
Depreciation, Depletion and Amortization(DDA) was $2,797 Mil.
Selling, General & Admin. Expense(SGA) was $558 Mil.
Total Current Liabilities was $4,488 Mil.
Long-Term Debt was $18,180 Mil.
Net Income was 217 + -479 + -4173 + -4040 = $-8,475 Mil.
Non Operating Income was 5 + 64 + 38 + 4 = $111 Mil.
Cash Flow from Operations was 980 + 874 + 740 + 612 = $3,206 Mil.
Accounts Receivable was $1,902 Mil.
Revenue was 3382 + 3938 + 4153 + 5235 = $16,708 Mil.
Gross Profit was -3779 + -2232 + -2802 + -2066 = $-10,879 Mil.
Total Current Assets was $8,155 Mil.
Total Assets was $50,383 Mil.
Property, Plant and Equipment(Net PPE) was $37,925 Mil.
Depreciation, Depletion and Amortization(DDA) was $3,656 Mil.
Selling, General & Admin. Expense(SGA) was $559 Mil.
Total Current Liabilities was $4,827 Mil.
Long-Term Debt was $19,792 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)
=(885 / 15524) / (1902 / 16708)
=0.0570085 / 0.11383768
=0.5008

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)
=(-10879 / 16708) / (-7544 / 15524)
=-0.65112521 / -0.48595723
=1.3399

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 - (11505 + 27761) / 41400) / (1 - (8155 + 37925) / 50383)
=0.05154589 / 0.08540579
=0.6035

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
=15524 / 16708
=0.9291

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))
=(3656 / (3656 + 37925)) / (2797 / (2797 + 27761))
=0.08792477 / 0.09153086
=0.9606

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)
=(558 / 15524) / (559 / 16708)
=0.03594434 / 0.03345703
=1.0743

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)
=((18180 + 4488) / 41400) / ((19792 + 4827) / 50383)
=0.54753623 / 0.48863704
=1.1205

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
=(-8475 - 111 - 3206) / 41400
=-0.2848

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 -4.37 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.

Freeport-McMoRan Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.86380.46583.27611.1080.41881.29021.34720.64870.9391.5073
GMI 1.32821.56320.58980.90621.06141.33211.19213.3295-0.11334.2956
AQI 8.56240.40781.00441.02730.62911.98620.82190.73331.37490.9926
SGI 2.92511.05060.84511.26211.10.86251.16161.02470.74060.9341
DEPI 1.44360.46271.59571.12851.20350.90870.95410.71190.85270.9109
SGAI 1.01470.54951.4120.94040.99021.20411.31230.87931.29781.1421
LVGI 0.89641.64550.80280.79850.70420.96012.0461.0121.28880.9877
TATA -0.0816-0.6176-0.0595-0.0627-0.0639-0.0167-0.0558-0.1194-0.3311-0.2176
M-score 2.04-5.95-0.96-2.39-3.22-1.87-2.65-2.23-4.92-1.38

Freeport-McMoRan Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.9160.64871.04310.97691.08990.91690.52760.44340.50081.5144
GMI 1.10593.3295-2.7108-0.9513-0.4123-0.11670.1210.38931.33994.2481
AQI 1.52640.73330.76040.77320.86671.37491.43011.21410.60350.9926
SGI 1.12991.02470.96640.84330.75640.75840.75870.79010.92910.9296
DEPI 0.54880.71190.81370.92330.85280.85270.8520.80940.96060.9109
SGAI 1.00780.87930.93121.07391.12481.2741.20381.21251.07431.1453
LVGI 0.93121.0121.09441.17481.28551.28881.30871.21511.12050.9877
TATA -0.0737-0.1194-0.1691-0.2138-0.292-0.3309-0.4025-0.3786-0.2848-0.2182
M-score -2.55-2.23-5.36-4.84-4.91-4.92-5.46-5.32-4.37-1.41
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