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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 NRG Energy Inc was 1.39. The lowest was -4.02. And the median was -2.44.
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 NRG Energy 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 * 1.1281||+||0.528 * 0.9081||+||0.404 * 0.8023||+||0.892 * 0.8092||+||0.115 * 0.971|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.2001||+||4.679 * -0.2401||-||0.327 * 1.1841|
|This Year (Sep16) TTM:||Last Year (Sep15) TTM:|
|Accounts Receivable was $1,362 Mil.|
Revenue was 3952 + 2638 + 3229 + 3011 = $12,830 Mil.
Gross Profit was 1159 + 882 + 1040 + 807 = $3,888 Mil.
Total Current Assets was $7,014 Mil.
Total Assets was $31,491 Mil.
Property, Plant and Equipment(Net PPE) was $18,203 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,506 Mil.
Selling, General & Admin. Expense(SGA) was $1,144 Mil.
Total Current Liabilities was $4,301 Mil.
Long-Term Debt was $18,018 Mil.
Net Income was 402 + -271 + 82 + -6314 = $-6,101 Mil.
Non Operating Income was -33 + -61 + -124 + 27 = $-191 Mil.
Cash Flow from Operations was 860 + 319 + 554 + -83 = $1,650 Mil.
|Accounts Receivable was $1,492 Mil.
Revenue was 4434 + 3400 + 3829 + 4192 = $15,855 Mil.
Gross Profit was 1392 + 964 + 766 + 1241 = $4,363 Mil.
Total Current Assets was $8,073 Mil.
Total Assets was $39,988 Mil.
Property, Plant and Equipment(Net PPE) was $21,985 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,762 Mil.
Selling, General & Admin. Expense(SGA) was $1,178 Mil.
Total Current Liabilities was $4,336 Mil.
Long-Term Debt was $19,598 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)|
|=||(1362 / 12830)||/||(1492 / 15855)|
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)|
|=||(4363 / 15855)||/||(3888 / 12830)|
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 - (7014 + 18203) / 31491)||/||(1 - (8073 + 21985) / 39988)|
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))|
|=||(1762 / (1762 + 21985))||/||(1506 / (1506 + 18203))|
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)|
|=||(1144 / 12830)||/||(1178 / 15855)|
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)|
|=||((18018 + 4301) / 31491)||/||((19598 + 4336) / 39988)|
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|
|=||(-6101 - -191||-||1650)||/||31491|
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.
NRG Energy Inc has a M-score of -3.88 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
NRG Energy Inc Annual Data
NRG Energy Inc Quarterly Data