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GuruFocus has detected 6 Warning Signs with Mercer International Inc $MERC.
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Mercer International Inc (NAS:MERC)
Beneish M-Score
-2.96 (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.

Mercer International Inc has a M-score of -2.96 suggests that the company is not a manipulator.

MERC' s Beneish M-Score Range Over the Past 10 Years
Min: -4.7   Max: -1.45
Current: -2.96

-4.7
-1.45

During the past 13 years, the highest Beneish M-Score of Mercer International Inc was -1.45. The lowest was -4.70. And the median was -2.40.


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 Mercer International 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 * 1.1004+0.528 * 1.2073+0.404 * 0.6+0.892 * 0.9017+0.115 * 0.9259
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0681+4.679 * -0.089-0.327 * 0.997
=-2.96

* 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 $118.4 Mil.
Revenue was 221.694 + 237.941 + 218.145 + 253.843 = $931.6 Mil.
Gross Profit was 51.446 + 39.894 + 27.063 + 39.869 = $158.3 Mil.
Total Current Assets was $401.9 Mil.
Total Assets was $1,158.7 Mil.
Property, Plant and Equipment(Net PPE) was $738.3 Mil.
Depreciation, Depletion and Amortization(DDA) was $72.0 Mil.
Selling, General & Admin. Expense(SGA) was $44.5 Mil.
Total Current Liabilities was $93.2 Mil.
Long-Term Debt was $644.0 Mil.
Net Income was 18.489 + 11.926 + -4.241 + 8.769 = $34.9 Mil.
Non Operating Income was -2.359 + 0.005 + -0.409 + 0.059 = $-2.7 Mil.
Cash Flow from Operations was 29.603 + 36.436 + 11.277 + 63.466 = $140.8 Mil.
Accounts Receivable was $119.4 Mil.
Revenue was 237.828 + 270.893 + 266.936 + 257.547 = $1,033.2 Mil.
Gross Profit was 54.878 + 56.497 + 45.25 + 55.295 = $211.9 Mil.
Total Current Assets was $388.8 Mil.
Total Assets was $1,182.8 Mil.
Property, Plant and Equipment(Net PPE) was $762.4 Mil.
Depreciation, Depletion and Amortization(DDA) was $68.3 Mil.
Selling, General & Admin. Expense(SGA) was $46.2 Mil.
Total Current Liabilities was $104.4 Mil.
Long-Term Debt was $650.3 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)
=(118.434 / 931.623) / (119.359 / 1033.204)
=0.12712653 / 0.11552317
=1.1004

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)
=(211.92 / 1033.204) / (158.272 / 931.623)
=0.20510954 / 0.16988846
=1.2073

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 - (401.851 + 738.276) / 1158.708) / (1 - (388.811 + 762.391) / 1182.817)
=0.01603596 / 0.02672856
=0.6

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
=931.623 / 1033.204
=0.9017

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))
=(68.333 / (68.333 + 762.391)) / (71.984 / (71.984 + 738.276))
=0.08225716 / 0.08884062
=0.9259

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)
=(44.529 / 931.623) / (46.236 / 1033.204)
=0.04779723 / 0.04475012
=1.0681

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)
=((644.012 + 93.17) / 1158.708) / ((650.342 + 104.421) / 1182.817)
=0.63621033 / 0.63810632
=0.997

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
=(34.943 - -2.704 - 140.782) / 1158.708
=-0.089

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.

Mercer International Inc has a M-score of -2.96 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.

Mercer International Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.01611.04930.88561.12421.0331.00070.94110.99321.01621.1004
GMI 1.35912.50142.31150.10191.32491.61011.27660.45940.87011.2073
AQI 0.56040.71820.37010.82241.8531.32640.9812.01340.53880.6
SGI 1.28760.94560.88561.34870.96240.9570.98661.07970.87920.9017
DEPI 0.95730.96221.01320.94280.97510.95370.95130.86730.98670.9259
SGAI 1.38440.99141.05640.83961.17391.05351.02370.86751.09721.0681
LVGI 0.95891.05681.09780.8840.92080.99031.03380.85251.05010.997
TATA -0.0255-0.0254-0.09140.0051-0.0511-0.0522-0.054-0.0312-0.065-0.089
M-score -2.37-1.94-2.72-2.52-2.21-2.32-2.68-2.38-3.17-2.96

Mercer International Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.98390.9720.90151.15361.07261.01621.10880.92791.06691.1004
GMI 0.57930.46080.53250.59890.69830.87011.00111.11931.21061.2073
AQI 1.87012.01341.74631.45010.62010.53880.59030.58780.70880.6
SGI 1.07851.10321.00910.98280.93280.87920.91350.88450.87920.9017
DEPI 0.89130.85050.80560.87170.94920.98671.1160.99470.98660.9259
SGAI 0.89910.86660.98460.97091.07991.09721.04511.07370.99831.0681
LVGI 0.88910.85250.94070.94821.01631.05010.91450.97460.96470.997
TATA -0.0224-0.0312-0.0312-0.0092-0.0619-0.065-0.0747-0.0944-0.0717-0.089
M-score -2.36-2.38-2.65-2.42-3.10-3.17-2.94-3.20-2.86-2.96
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