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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 -2.43.
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 * 1.063||+||0.528 * 0.8629||+||0.404 * 0.8533||+||0.892 * 0.8329||+||0.115 * 0.9271|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 1.284||+||4.679 * -0.2555||-||0.327 * 1.1929|
|This Year (Jun16) TTM:||Last Year (Jun15) TTM:|
|Accounts Receivable was $1,251 Mil.|
Revenue was 2638 + 3229 + 3020 + 4431 = $13,318 Mil.
Gross Profit was 882 + 1040 + 795 + 1397 = $4,114 Mil.
Total Current Assets was $6,364 Mil.
Total Assets was $31,422 Mil.
Property, Plant and Equipment(Net PPE) was $18,382 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,532 Mil.
Selling, General & Admin. Expense(SGA) was $1,186 Mil.
Total Current Liabilities was $4,514 Mil.
Long-Term Debt was $17,893 Mil.
Net Income was -271 + 82 + -6314 + 66 = $-6,437 Mil.
Non Operating Income was -61 + -124 + 27 + 26 = $-132 Mil.
Cash Flow from Operations was 319 + 554 + -83 + 934 = $1,724 Mil.
|Accounts Receivable was $1,413 Mil.
Revenue was 3400 + 3829 + 4192 + 4569 = $15,990 Mil.
Gross Profit was 964 + 766 + 1241 + 1291 = $4,262 Mil.
Total Current Assets was $8,010 Mil.
Total Assets was $40,365 Mil.
Property, Plant and Equipment(Net PPE) was $22,304 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,713 Mil.
Selling, General & Admin. Expense(SGA) was $1,109 Mil.
Total Current Liabilities was $4,469 Mil.
Long-Term Debt was $19,661 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)|
|=||(1251 / 13318)||/||(1413 / 15990)|
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)|
|=||(4262 / 15990)||/||(4114 / 13318)|
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 - (6364 + 18382) / 31422)||/||(1 - (8010 + 22304) / 40365)|
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))|
|=||(1713 / (1713 + 22304))||/||(1532 / (1532 + 18382))|
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)|
|=||(1186 / 13318)||/||(1109 / 15990)|
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)|
|=||((17893 + 4514) / 31422)||/||((19661 + 4469) / 40365)|
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|
|=||(-6437 - -132||-||1724)||/||31422|
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 -4.02 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