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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 Magellan Midstream Partners LP was 7.94. The lowest was -3.77. And the median was -2.38.
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 Magellan Midstream Partners LP 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 * 1.1988||+||0.528 * 0.9858||+||0.404 * 1.0092||+||0.892 * 0.9249||+||0.115 * 1.0237|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.094||+||4.679 * -0.0318||-||0.327 * 1.0583|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $126 Mil.|
Revenue was 551.782 + 518.897 + 519.816 + 573.048 = $2,164 Mil.
Gross Profit was 298.254 + 289.032 + 282.998 + 312.455 = $1,183 Mil.
Total Current Assets was $648 Mil.
Total Assets was $6,920 Mil.
Property, Plant and Equipment(Net PPE) was $5,186 Mil.
Depreciation, Depletion and Amortization(DDA) was $177 Mil.
Selling, General & Admin. Expense(SGA) was $151 Mil.
Total Current Liabilities was $684 Mil.
Long-Term Debt was $4,074 Mil.
Net Income was 194.551 + 187.859 + 207.07 + 207.123 = $797 Mil.
Non Operating Income was 3.324 + 3.169 + 29.17 + -3.539 = $32 Mil.
Cash Flow from Operations was 231.927 + 197.5 + 209.568 + 345.588 = $985 Mil.
|Accounts Receivable was $114 Mil.
Revenue was 586.675 + 498.428 + 530.302 + 723.699 = $2,339 Mil.
Gross Profit was 353.804 + 261.603 + 287.416 + 357.705 = $1,261 Mil.
Total Current Assets was $358 Mil.
Total Assets was $5,966 Mil.
Property, Plant and Equipment(Net PPE) was $4,681 Mil.
Depreciation, Depletion and Amortization(DDA) was $163 Mil.
Selling, General & Admin. Expense(SGA) was $150 Mil.
Total Current Liabilities was $469 Mil.
Long-Term Debt was $3,407 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)|
|=||(126.141 / 2163.543)||/||(113.76 / 2339.104)|
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)|
|=||(1260.528 / 2339.104)||/||(1182.739 / 2163.543)|
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 - (648.275 + 5186.042) / 6919.785)||/||(1 - (358.156 + 4680.65) / 5966.183)|
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))|
|=||(163.459 / (163.459 + 4680.65))||/||(176.769 / (176.769 + 5186.042))|
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)|
|=||(151.493 / 2163.543)||/||(149.719 / 2339.104)|
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)|
|=||((4073.502 + 683.849) / 6919.785)||/||((3407.114 + 468.562) / 5966.183)|
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|
|=||(796.603 - 32.124||-||984.583)||/||6919.785|
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.
Magellan Midstream Partners LP has a M-score of -2.55 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
Magellan Midstream Partners LP Annual Data
Magellan Midstream Partners LP Quarterly Data