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GuruFocus has detected 9 Warning Signs with HRG Group Inc $HRG.
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HRG Group Inc (NYSE:HRG)
Beneish M-Score
-2.68 (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.

HRG Group Inc has a M-score of -2.68 suggests that the company is not a manipulator.

HRG' s Beneish M-Score Range Over the Past 10 Years
Min: -6.48   Max: 641.18
Current: -2.68

-6.48
641.18

During the past 13 years, the highest Beneish M-Score of HRG Group Inc was 641.18. The lowest was -6.48. And the median was -2.36.


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 HRG 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 * 0.8691+0.528 * 0.872+0.404 * 1.0201+0.892 * 1.0829+0.115 * 0.8154
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9186+4.679 * -0.0264-0.327 * 0.875
=-2.68

* 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 $2,166 Mil.
Revenue was 1189.6 + 1265.3 + 1447.1 + 1269.5 = $5,172 Mil.
Gross Profit was 427.8 + 536.7 + 607.1 + 513.5 = $2,085 Mil.
Total Current Assets was $3,294 Mil.
Total Assets was $35,663 Mil.
Property, Plant and Equipment(Net PPE) was $569 Mil.
Depreciation, Depletion and Amortization(DDA) was $183 Mil.
Selling, General & Admin. Expense(SGA) was $1,341 Mil.
Total Current Liabilities was $900 Mil.
Long-Term Debt was $5,459 Mil.
Net Income was 212.2 + -7.3 + -132.9 + -34.8 = $37 Mil.
Non Operating Income was 1.4 + -102.9 + -3.3 + 0.5 = $-104 Mil.
Cash Flow from Operations was 80.7 + 526.3 + 403.5 + 72.4 = $1,083 Mil.
Accounts Receivable was $2,301 Mil.
Revenue was 1209.4 + 1195 + 1227.2 + 1143.8 = $4,775 Mil.
Gross Profit was 431.3 + 420.5 + 413.6 + 413.5 = $1,679 Mil.
Total Current Assets was $3,745 Mil.
Total Assets was $35,033 Mil.
Property, Plant and Equipment(Net PPE) was $664 Mil.
Depreciation, Depletion and Amortization(DDA) was $165 Mil.
Selling, General & Admin. Expense(SGA) was $1,348 Mil.
Total Current Liabilities was $854 Mil.
Long-Term Debt was $6,285 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)
=(2165.5 / 5171.5) / (2300.9 / 4775.4)
=0.41873731 / 0.48182351
=0.8691

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)
=(1678.9 / 4775.4) / (2085.1 / 5171.5)
=0.35157264 / 0.40319056
=0.872

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 - (3294 + 569.1) / 35662.7) / (1 - (3745 + 664.3) / 35032.8)
=0.89167674 / 0.87413795
=1.0201

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
=5171.5 / 4775.4
=1.0829

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))
=(164.6 / (164.6 + 664.3)) / (183.2 / (183.2 + 569.1))
=0.19857643 / 0.24351987
=0.8154

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)
=(1340.5 / 5171.5) / (1347.5 / 4775.4)
=0.25920913 / 0.28217532
=0.9186

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)
=((5459 + 900.4) / 35662.7) / ((6285.4 + 854.1) / 35032.8)
=0.17832077 / 0.20379473
=0.875

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
=(37.2 - -104.3 - 1082.9) / 35662.7
=-0.0264

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.

HRG Group Inc has a M-score of -2.68 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.

HRG Group Inc Annual Data

Dec07Dec08Dec09Dec10Sep11Sep12Sep13Sep14Sep15Sep16
DSRI 111190.87730.72981.20051.10481.06710.8737
GMI 11110.39920.78041.03411.33271.07760.8766
AQI 0.14170.14170.13131.82992.19370.96670.94960.94561.09741.0121
SGI 000031.64541.28841.23720.83611.01621.1074
DEPI 0.66070.66073.96432.71792.09290.57642.06421.78910.59010.9946
SGAI 11116.92721.09750.82640.85371.08190.8864
LVGI 0.11470.11470.231810.54691.6990.98011.82640.97140.9780.8918
TATA -0.0012-0.0012-0.078-0.0183-0.0109-0.0159-0.0165-0.0229-0.0263-0.0311
M-score -3.47-3.47-3.50-6.05106.53-2.73-2.28-2.36-2.50-2.65

HRG Group Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 1.10481.39766.61877.5951.06753.11420.63270.53380.87740.8691
GMI 1.33271.54241.76542.73321.07840.92930.77550.48610.87480.872
AQI 0.94561.00781.01440.93021.09740.99911.09521.09051.01211.0201
SGI 0.83610.73170.70630.62121.01581.11931.20451.38521.10271.0829
DEPI 1.78912.15362.29922.1460.59010.58150.56890.54760.99460.8154
SGAI 0.85490.73270.64340.48331.07921.14451.26471.52910.90150.9186
LVGI 0.97140.9990.97381.13390.9780.96860.9670.81230.89180.875
TATA -0.0229-0.0295-0.0315-0.0311-0.0263-0.0216-0.0203-0.0287-0.0284-0.0264
M-score -2.36-2.022.914.17-2.50-0.63-2.89-3.02-2.64-2.68
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