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GuruFocus has detected 1 Warning Sign with Hormel Foods Corp $HRL.
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Hormel Foods Corp (NYSE:HRL)
Beneish M-Score
-2.61 (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.

Hormel Foods Corp has a M-score of -2.61 suggests that the company is not a manipulator.

HRL' s Beneish M-Score Range Over the Past 10 Years
Min: -3.02   Max: -1.99
Current: -2.61

-3.02
-1.99

During the past 13 years, the highest Beneish M-Score of Hormel Foods Corp was -1.99. The lowest was -3.02. And the median was -2.56.


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 Hormel Foods 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 * 0.9497+0.528 * 0.8615+0.404 * 1.0172+0.892 * 1.028+0.115 * 1.0926
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1407+4.679 * -0.0161-0.327 * 0.858
=-2.61

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

This Year (Oct16) TTM:Last Year (Oct15) TTM:
Accounts Receivable was $591 Mil.
Revenue was 2627.941 + 2302.376 + 2300.235 + 2292.672 = $9,523 Mil.
Gross Profit was 598.52 + 475.285 + 526.359 + 558.011 = $2,158 Mil.
Total Current Assets was $2,030 Mil.
Total Assets was $6,370 Mil.
Property, Plant and Equipment(Net PPE) was $1,105 Mil.
Depreciation, Depletion and Amortization(DDA) was $132 Mil.
Selling, General & Admin. Expense(SGA) was $872 Mil.
Total Current Liabilities was $1,053 Mil.
Long-Term Debt was $250 Mil.
Net Income was 243.94 + 195.654 + 215.397 + 235.061 = $890 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 371.162 + 212.551 + 130.444 + 278.691 = $993 Mil.
Accounts Receivable was $606 Mil.
Revenue was 2400.858 + 2188.587 + 2279.345 + 2395.073 = $9,264 Mil.
Gross Profit was 495.03 + 409.39 + 459.556 + 444.605 = $1,809 Mil.
Total Current Assets was $2,063 Mil.
Total Assets was $6,140 Mil.
Property, Plant and Equipment(Net PPE) was $1,012 Mil.
Depreciation, Depletion and Amortization(DDA) was $133 Mil.
Selling, General & Admin. Expense(SGA) was $744 Mil.
Total Current Liabilities was $1,214 Mil.
Long-Term Debt was $250 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)
=(591.31 / 9523.224) / (605.689 / 9263.863)
=0.06209137 / 0.0653819
=0.9497

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)
=(1808.581 / 9263.863) / (2158.175 / 9523.224)
=0.19522968 / 0.22662231
=0.8615

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 - (2029.912 + 1105.449) / 6370.067) / (1 - (2063.032 + 1011.739) / 6139.831)
=0.5077978 / 0.49920918
=1.0172

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
=9523.224 / 9263.863
=1.028

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))
=(133.434 / (133.434 + 1011.739)) / (131.968 / (131.968 + 1105.449))
=0.11651864 / 0.10664796
=1.0926

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)
=(871.974 / 9523.224) / (743.611 / 9263.863)
=0.0915629 / 0.08027008
=1.1407

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)
=((250 + 1053.196) / 6370.067) / ((250 + 1214.025) / 6139.831)
=0.20458121 / 0.23844712
=0.858

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
=(890.052 - 0 - 992.848) / 6370.067
=-0.0161

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.

Hormel Foods Corp has a M-score of -2.61 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.

Hormel Foods Corp Annual Data

Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Oct15Oct16
DSRI 0.99481.02780.93651.04740.97861.05481.02291.03820.99930.9497
GMI 1.0541.45290.93470.98041.01521.04431.00240.9610.86040.8615
AQI 1.06950.94260.95010.9961.00420.91591.34681.09321.17341.0172
SGI 1.07791.09070.96721.10521.09341.04251.06331.06450.99441.028
DEPI 1.01241.0140.9710.98220.99561.05190.99031.00590.98611.0926
SGAI 0.92480.54231.06110.96580.93470.93950.97380.97471.14881.1407
LVGI 0.97861.04610.89620.9690.89180.93730.92641.04981.07980.858
TATA -0.00880.0116-0.0638-0.0222-0.0101-0.0039-0.0227-0.0264-0.0498-0.0161
M-score -2.38-2.04-2.90-2.44-2.41-2.38-2.34-2.51-2.78-2.61

Hormel Foods Corp Quarterly Data

Jul14Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16
DSRI 0.9861.03821.07361.06040.98950.99930.99150.98091.04110.9497
GMI 0.95540.9610.97140.93510.9090.86040.8110.82190.83550.8615
AQI 0.96931.09321.09211.08821.33741.17341.22421.21871.02761.0172
SGI 1.05781.06451.06651.05941.03420.99440.96760.96620.98821.028
DEPI 0.99081.00590.99740.98051.00120.98611.00511.05581.05221.0926
SGAI 0.93480.97470.97791.03171.10171.14881.20171.19371.14721.1407
LVGI 0.91381.04981.00711.01121.23041.07980.98450.97540.87930.858
TATA -0.0028-0.0264-0.0104-0.0456-0.0612-0.0498-0.0455-0.0279-0.0141-0.0161
M-score -2.45-2.51-2.38-2.59-2.75-2.78-2.77-2.68-2.57-2.61
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