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GuruFocus has detected 5 Warning Signs with Forestar Group Inc $FOR.
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Forestar Group Inc (NYSE:FOR)
Beneish M-Score
-2.14 (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.

Forestar Group Inc has a M-score of -2.14 signals that the company is a manipulator.

FOR' s Beneish M-Score Range Over the Past 10 Years
Min: -3.69   Max: 2.49
Current: -2.14

-3.69
2.49

During the past 13 years, the highest Beneish M-Score of Forestar Group Inc was 2.49. The lowest was -3.69. And the median was -2.16.


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 Forestar Group 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 * 0.7236+0.528 * 3.112+0.404 * 0.8383+0.892 * 0.8803+0.115 * 1.0276
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9003+4.679 * -0.1198-0.327 * 0.4256
=-2.14

* 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 $19.8 Mil.
Revenue was 64.497 + 47.207 + 47.992 + 41.888 = $201.6 Mil.
Gross Profit was 17.352 + 17.403 + -24.953 + 17.885 = $27.7 Mil.
Total Current Assets was $580.6 Mil.
Total Assets was $733.2 Mil.
Property, Plant and Equipment(Net PPE) was $3.1 Mil.
Depreciation, Depletion and Amortization(DDA) was $11.4 Mil.
Selling, General & Admin. Expense(SGA) was $21.6 Mil.
Total Current Liabilities was $25.1 Mil.
Long-Term Debt was $110.4 Mil.
Net Income was 43.745 + 9.665 + 9.614 + -4.376 = $58.6 Mil.
Non Operating Income was 2.349 + 4.886 + 72.271 + 0.121 = $79.6 Mil.
Cash Flow from Operations was 37.07 + 17.268 + 7.53 + 5.009 = $66.9 Mil.
Accounts Receivable was $31.1 Mil.
Revenue was 105.392 + 32.185 + 43.625 + 47.805 = $229.0 Mil.
Gross Profit was 46.655 + 12.879 + 21.06 + 17.289 = $97.9 Mil.
Total Current Assets was $725.0 Mil.
Total Assets was $972.2 Mil.
Property, Plant and Equipment(Net PPE) was $10.7 Mil.
Depreciation, Depletion and Amortization(DDA) was $45.1 Mil.
Selling, General & Admin. Expense(SGA) was $27.3 Mil.
Total Current Liabilities was $40.6 Mil.
Long-Term Debt was $381.5 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)
=(19.798 / 201.584) / (31.081 / 229.007)
=0.09821216 / 0.13572074
=0.7236

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)
=(97.883 / 229.007) / (27.687 / 201.584)
=0.42742362 / 0.13734721
=3.112

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 - (580.599 + 3.116) / 733.208) / (1 - (725.037 + 10.732) / 972.246)
=0.20388894 / 0.24322754
=0.8383

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
=201.584 / 229.007
=0.8803

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))
=(45.085 / (45.085 + 10.732)) / (11.447 / (11.447 + 3.116))
=0.80772883 / 0.7860331
=1.0276

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)
=(21.597 / 201.584) / (27.253 / 229.007)
=0.10713648 / 0.1190051
=0.9003

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)
=((110.358 + 25.121) / 733.208) / ((381.515 + 40.553) / 972.246)
=0.18477567 / 0.43411647
=0.4256

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
=(58.648 - 79.627 - 66.877) / 733.208
=-0.1198

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.

Forestar Group Inc has a M-score of -2.14 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.

Forestar Group Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.78381.59510.37292.25336.05421.13450.60861.13641.05530.7056
GMI 1.08280.88670.95291.24721.03590.98451.30740.87021.00153.1364
AQI 0.18625.4291.12061.06710.93030.9420.74341.06881.6040.8383
SGI 0.78910.89740.91570.69311.33751.2731.91810.71940.91780.9027
DEPI 0.00711.17660.84821.01531.220319.43240.71150.28890.1631.0276
SGAI 1.55851.331.47031.08870.77231.08840.45771.08891.33580.8779
LVGI 4.88611.07050.69621.0011.05871.33060.85811.11971.07820.4256
TATA 0.12040.0706-0.0964-0.0181-0.00490.0186-0.0685-0.0857-0.27480.027
M-score -4.07-0.02-3.56-1.542.48-0.06-2.18-3.18-3.72-1.44

Forestar Group Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.25391.13640.88450.83490.83491.00721.21360.25740.79570.7236
GMI 1.05270.87020.91040.85640.74621.0571.0112.07882.23053.112
AQI 0.78911.06881.0411.31381.18661.6040.94060.99431.13480.8383
SGI 1.07840.71940.63290.47480.41660.96161.10791.40431.79190.8803
DEPI 0.94630.28890.82110.68990.44610.1630.32020.22450.41611.0276
SGAI 0.73021.08891.72932.03552.84691.2750.91560.78150.42970.9003
LVGI 1.01191.11971.15681.08931.21711.07821.09670.52930.44950.4256
TATA -0.0691-0.0857-0.0814-0.105-0.2571-0.276-0.3001-0.4567-0.2228-0.1198
M-score -2.52-3.18-3.52-3.78-4.87-3.69-3.70-4.27-2.09-2.14
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