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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.
During the past 13 years, the highest Beneish M-Score of Hormel Foods Corp was -1.99. The lowest was -3.20. And the median was -2.51.
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 * 0.9915||+||0.528 * 0.811||+||0.404 * 1.2242||+||0.892 * 0.9676||+||0.115 * 1.0051|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2017||+||4.679 * -0.0455||-||0.327 * 0.9845|
|This Year (Jan16) TTM:||Last Year (Jan15) TTM:|
|Accounts Receivable was $555 Mil.|
Revenue was 2292.672 + 2400.858 + 2188.587 + 2279.345 = $9,161 Mil.
Gross Profit was 558.011 + 495.03 + 409.39 + 459.556 = $1,922 Mil.
Total Current Assets was $1,946 Mil.
Total Assets was $6,041 Mil.
Property, Plant and Equipment(Net PPE) was $1,014 Mil.
Depreciation, Depletion and Amortization(DDA) was $132 Mil.
Selling, General & Admin. Expense(SGA) was $773 Mil.
Total Current Liabilities was $1,020 Mil.
Long-Term Debt was $250 Mil.
Net Income was 235.061 + 187.231 + 146.938 + 180.201 = $749 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 278.691 + 301.747 + 244.508 + 199.235 = $1,024 Mil.
|Accounts Receivable was $578 Mil.
Revenue was 2395.073 + 2543.771 + 2284.947 + 2244.866 = $9,469 Mil.
Gross Profit was 444.605 + 423.584 + 363.999 + 378.758 = $1,611 Mil.
Total Current Assets was $2,246 Mil.
Total Assets was $5,560 Mil.
Property, Plant and Equipment(Net PPE) was $997 Mil.
Depreciation, Depletion and Amortization(DDA) was $131 Mil.
Selling, General & Admin. Expense(SGA) was $665 Mil.
Total Current Liabilities was $937 Mil.
Long-Term Debt was $250 Mil.
1. DSRI = Days Sales in Receivables Index
A large increase in DSR could be indicative of revenue inflation.
|DSRI||=||(Receivables_t / Revenue_t)||/||(Receivables_t-1 / Revenue_t-1)|
|=||(554.738 / 9161.462)||/||(578.238 / 9468.657)|
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.
|=||(GrossProfit_t-1 / Revenue_t-1)||/||(GrossProfit_t / Revenue_t)|
|=||(495.03 / 9468.657)||/||(558.011 / 9161.462)|
3. AQI = Asset Quality Index
AQI is the ratio of asset quality in year t to year t-1.
|AQI||=||(1 - (CurrentAssets_t + PPE_t) / TotalAssets_t)||/||(1 - (CurrentAssets_t-1 + PPE_t-1) / TotalAssets_t-1)|
|=||(1 - (1946.083 + 1014.003) / 6040.889)||/||(1 - (2246.331 + 997.237) / 5559.623)|
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.
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))|
|=||(131.043 / (131.043 + 997.237))||/||(132.479 / (132.479 + 1014.003))|
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)|
|=||(773.26 / 9161.462)||/||(665.058 / 9468.657)|
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 + 1020.098) / 6040.889)||/||((250 + 937.304) / 5559.623)|
8. TATA = Total Accruals to Total Assets
Total accruals calculated as the change in working capital accounts other than cash less depreciation.
|=||(NetIncome_t - NonOperatingIncome_t||-||CashFlowsfromOperations_t)||/||TotalAssets_t|
|=||(749.431 - 0||-||1024.181)||/||6040.889|
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 -2.77 suggests that the company will not be a manipulator.
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
Hormel Foods Corp Annual Data
Hormel Foods Corp Quarterly Data