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GuruFocus has detected 3 Warning Signs with FirstEnergy Corp $FE.
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FirstEnergy Corp (NYSE:FE)
Beneish M-Score
-3.60 (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.

FirstEnergy Corp has a M-score of -3.60 suggests that the company is not a manipulator.

FE' s Beneish M-Score Range Over the Past 10 Years
Min: -3.6   Max: -2.57
Current: -3.6

-3.6
-2.57

During the past 13 years, the highest Beneish M-Score of FirstEnergy Corp was -2.57. The lowest was -3.60. And the median was -2.77.


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 FirstEnergy 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 * 1.0501+0.528 * 0.9446+0.404 * 1.1024+0.892 * 0.9691+0.115 * 0.7718
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0355+4.679 * -0.2232-0.327 * 1.2375
=-3.60

* 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 $1,440 Mil.
Revenue was 3375 + 3917 + 3401 + 3869 = $14,562 Mil.
Gross Profit was 2157 + 2488 + 2074 + 2364 = $9,083 Mil.
Total Current Assets was $2,950 Mil.
Total Assets was $43,148 Mil.
Property, Plant and Equipment(Net PPE) was $29,387 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,997 Mil.
Selling, General & Admin. Expense(SGA) was $4,005 Mil.
Total Current Liabilities was $7,126 Mil.
Long-Term Debt was $18,192 Mil.
Net Income was -5796 + 380 + -1089 + 328 = $-6,177 Mil.
Non Operating Income was 9 + 28 + 19 + 28 = $84 Mil.
Cash Flow from Operations was 791 + 1120 + 822 + 638 = $3,371 Mil.
Accounts Receivable was $1,415 Mil.
Revenue was 3541 + 4123 + 3465 + 3897 = $15,026 Mil.
Gross Profit was 2057 + 2432 + 2093 + 2271 = $8,853 Mil.
Total Current Assets was $3,040 Mil.
Total Assets was $52,094 Mil.
Property, Plant and Equipment(Net PPE) was $37,214 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,922 Mil.
Selling, General & Admin. Expense(SGA) was $3,991 Mil.
Total Current Liabilities was $5,602 Mil.
Long-Term Debt was $19,099 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)
=(1440 / 14562) / (1415 / 15026)
=0.09888752 / 0.09417011
=1.0501

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)
=(8853 / 15026) / (9083 / 14562)
=0.58917876 / 0.62374674
=0.9446

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 - (2950 + 29387) / 43148) / (1 - (3040 + 37214) / 52094)
=0.25055623 / 0.22728145
=1.1024

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
=14562 / 15026
=0.9691

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))
=(1922 / (1922 + 37214)) / (1997 / (1997 + 29387))
=0.04911079 / 0.06363115
=0.7718

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)
=(4005 / 14562) / (3991 / 15026)
=0.2750309 / 0.26560628
=1.0355

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)
=((18192 + 7126) / 43148) / ((19099 + 5602) / 52094)
=0.58677111 / 0.47416209
=1.2375

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
=(-6177 - 84 - 3371) / 43148
=-0.2232

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.

FirstEnergy Corp has a M-score of -3.60 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.

FirstEnergy Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.00211.08831.06740.94981.09170.89410.91191.0501
GMI 1.07371.0010.98650.98890.98841.05820.90820.9446
AQI 0.90630.94380.88580.94110.96250.92790.93861.1024
SGI 0.9521.02821.20740.94720.97621.01050.99850.9691
DEPI 0.99481.01281.07970.86330.68341.34580.86730.7718
SGAI 0.93041.04721.27091.03510.78241.42250.83331.0355
LVGI 1.03740.99020.87561.03811.03151.02910.991.2375
TATA -0.0485-0.0704-0.0605-0.0322-0.0431-0.0481-0.0477-0.2232
M-score -2.75-2.73-2.57-2.79-2.65-2.83-2.84-3.60

FirstEnergy Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.98560.89420.9320.95661.00720.91190.84160.8320.93841.0501
GMI 1.05961.05840.98320.93810.92040.90820.93270.95880.95520.9446
AQI 0.9050.92790.94710.95320.94980.93860.95070.8980.88311.1024
SGI 1.03131.01030.96160.96020.98480.99851.01581.01360.9840.9691
DEPI 0.68471.34581.31151.30121.23920.86730.89440.90460.97320.7718
SGAI 0.82381.42281.33591.25651.2270.83330.81160.84890.90251.0355
LVGI 1.03711.02911.00920.99990.99090.990.99181.0211.03811.2375
TATA -0.0403-0.0481-0.0525-0.0507-0.0531-0.0477-0.0538-0.0809-0.0774-0.2232
M-score -2.68-2.83-2.88-2.85-2.81-2.84-2.90-3.06-2.98-3.60
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