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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 * 1.0411||+||0.528 * 0.8355||+||0.404 * 1.0276||+||0.892 * 0.9882||+||0.115 * 1.0522|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.1472||+||4.679 * -0.0141||-||0.327 * 0.8793|
|This Year (Jul16) TTM:||Last Year (Jul15) TTM:|
|Accounts Receivable was $565 Mil.|
Revenue was 2302.376 + 2300.235 + 2292.672 + 2400.858 = $9,296 Mil.
Gross Profit was 475.285 + 526.359 + 558.011 + 495.03 = $2,055 Mil.
Total Current Assets was $2,010 Mil.
Total Assets was $6,388 Mil.
Property, Plant and Equipment(Net PPE) was $1,053 Mil.
Depreciation, Depletion and Amortization(DDA) was $131 Mil.
Selling, General & Admin. Expense(SGA) was $817 Mil.
Total Current Liabilities was $1,129 Mil.
Long-Term Debt was $250 Mil.
Net Income was 195.654 + 215.397 + 235.061 + 187.231 = $833 Mil.
Non Operating Income was 0 + 0 + 0 + 0 = $0 Mil.
Cash Flow from Operations was 212.551 + 130.444 + 278.691 + 301.747 = $923 Mil.
|Accounts Receivable was $549 Mil.
Revenue was 2188.587 + 2279.345 + 2395.073 + 2543.771 = $9,407 Mil.
Gross Profit was 409.39 + 459.556 + 444.605 + 423.584 = $1,737 Mil.
Total Current Assets was $2,004 Mil.
Total Assets was $6,091 Mil.
Property, Plant and Equipment(Net PPE) was $1,002 Mil.
Depreciation, Depletion and Amortization(DDA) was $132 Mil.
Selling, General & Admin. Expense(SGA) was $721 Mil.
Total Current Liabilities was $1,245 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)|
|=||(564.922 / 9296.141)||/||(549.056 / 9406.776)|
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)|
|=||(1737.135 / 9406.776)||/||(2054.685 / 9296.141)|
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 - (2010.105 + 1052.918) / 6388.297)||/||(1 - (2003.776 + 1001.81) / 6091.081)|
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))|
|=||(131.937 / (131.937 + 1001.81))||/||(130.927 / (130.927 + 1052.918))|
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)|
|=||(816.92 / 9296.141)||/||(720.598 / 9406.776)|
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 + 1128.727) / 6388.297)||/||((250 + 1245.107) / 6091.081)|
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|
|=||(833.343 - 0||-||923.433)||/||6388.297|
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 -2.57 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