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GuruFocus has detected 4 Warning Signs with NRG Energy Inc $NRG.
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NRG Energy Inc (NYSE:NRG)
Beneish M-Score
-2.92 (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.

NRG Energy Inc has a M-score of -2.92 suggests that the company is not a manipulator.

NRG' s Beneish M-Score Range Over the Past 10 Years
Min: -3.9   Max: -1.25
Current: -2.92

-3.9
-1.25

During the past 13 years, the highest Beneish M-Score of NRG Energy Inc was -1.25. The lowest was -3.90. And the median was -2.52.


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 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 * 1.1973+0.528 * 0.869+0.404 * 0.9693+0.892 * 0.8417+0.115 * 1.0675
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0722+4.679 * -0.0825-0.327 * 1.0383
=-2.92

* 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 $1,166 Mil.
Revenue was 2532 + 3952 + 2638 + 3229 = $12,351 Mil.
Gross Profit was 715 + 1159 + 882 + 1040 = $3,796 Mil.
Total Current Assets was $6,395 Mil.
Total Assets was $30,355 Mil.
Property, Plant and Equipment(Net PPE) was $17,912 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,507 Mil.
Selling, General & Admin. Expense(SGA) was $1,101 Mil.
Total Current Liabilities was $4,382 Mil.
Long-Term Debt was $18,006 Mil.
Net Income was -987 + 402 + -271 + 82 = $-774 Mil.
Non Operating Income was -123 + -33 + -61 + -124 = $-341 Mil.
Cash Flow from Operations was 339 + 860 + 319 + 554 = $2,072 Mil.
Accounts Receivable was $1,157 Mil.
Revenue was 3020 + 4431 + 3397 + 3826 = $14,674 Mil.
Gross Profit was 795 + 1397 + 963 + 764 = $3,919 Mil.
Total Current Assets was $7,391 Mil.
Total Assets was $32,882 Mil.
Property, Plant and Equipment(Net PPE) was $18,732 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,692 Mil.
Selling, General & Admin. Expense(SGA) was $1,220 Mil.
Total Current Liabilities was $4,375 Mil.
Long-Term Debt was $18,983 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)
=(1166 / 12351) / (1157 / 14674)
=0.09440531 / 0.07884694
=1.1973

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)
=(3919 / 14674) / (3796 / 12351)
=0.26707101 / 0.30734353
=0.869

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 - (6395 + 17912) / 30355) / (1 - (7391 + 18732) / 32882)
=0.1992423 / 0.20555319
=0.9693

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
=12351 / 14674
=0.8417

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))
=(1692 / (1692 + 18732)) / (1507 / (1507 + 17912))
=0.08284371 / 0.07760441
=1.0675

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)
=(1101 / 12351) / (1220 / 14674)
=0.08914258 / 0.08314025
=1.0722

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)
=((18006 + 4382) / 30355) / ((18983 + 4375) / 32882)
=0.73753912 / 0.71035825
=1.0383

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
=(-774 - -341 - 2072) / 30355
=-0.0825

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 -2.92 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.

NRG Energy Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.21810.83741.4520.84771.10751.27450.91810.77510.94641.1973
GMI 112.46681.29221.18480.9550.98661.09050.96490.869
AQI 0.92130.8441.24691.12290.76420.95520.96881.25490.86030.9693
SGI 1.07231.14961.30020.98851.0260.92761.34111.40490.92480.8417
DEPI 0.40211.70350.39681.21690.90931.36510.8380.930.82131.0675
SGAI 1.22550.77441.27271.00161.08881.43950.75570.82051.26611.0722
LVGI 0.96451.09110.86240.9711.19681.00691.01391.03361.16671.0383
TATA -0.0545-0.0216-0.056-0.0455-0.0132-0.0328-0.045-0.0339-0.2361-0.0825
M-score -2.60-2.57-1.26-2.61-2.51-2.52-2.46-2.32-3.90-2.92

NRG Energy Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.83040.77510.8040.79880.87680.94640.99421.06261.12671.1973
GMI 1.0791.09051.1240.99350.92840.96490.84890.86260.91250.869
AQI 1.24251.25491.24171.12940.99340.86030.81650.85330.80230.9693
SGI 1.371.40491.27621.19351.0950.92480.86850.83320.81020.8417
DEPI 0.94990.930.91580.8410.88530.82130.89410.91710.91561.0675
SGAI 0.77060.76230.90130.96581.09031.26611.29331.29171.19221.0722
LVGI 1.05451.03361.01240.98180.98041.16671.15651.19291.18411.0383
TATA -0.043-0.0339-0.0335-0.0375-0.0457-0.2361-0.2361-0.2555-0.2401-0.0825
M-score -2.35-2.31-2.40-2.63-2.79-3.90-3.98-4.02-3.89-2.92
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