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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 -0.59. The lowest was -3.62. And the median was -2.46.
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 * 0.7751||+||0.528 * 1.0905||+||0.404 * 1.2549||+||0.892 * 1.4049||+||0.115 * 0.93|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.8205||+||4.679 * -0.0339||-||0.327 * 1.0336|
|This Year (Dec14) TTM:||Last Year (Dec13) TTM:|
|Accounts Receivable was $1,322 Mil.|
Revenue was 4192 + 4569 + 3621 + 3486 = $15,868 Mil.
Gross Profit was 1241 + 1291 + 804 + 753 = $4,089 Mil.
Total Current Assets was $8,582 Mil.
Total Assets was $40,665 Mil.
Property, Plant and Equipment(Net PPE) was $22,367 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,633 Mil.
Selling, General & Admin. Expense(SGA) was $1,042 Mil.
Total Current Liabilities was $4,859 Mil.
Long-Term Debt was $19,900 Mil.
Net Income was 119 + 168 + -97 + -56 = $134 Mil.
Non Operating Income was 44 + 2 + -21 + -23 = $2 Mil.
Cash Flow from Operations was 396 + 744 + -21 + 391 = $1,510 Mil.
|Accounts Receivable was $1,214 Mil.
Revenue was 2795 + 3490 + 2929 + 2081 = $11,295 Mil.
Gross Profit was 851 + 1117 + 878 + 328 = $3,174 Mil.
Total Current Assets was $7,596 Mil.
Total Assets was $33,902 Mil.
Property, Plant and Equipment(Net PPE) was $19,851 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,341 Mil.
Selling, General & Admin. Expense(SGA) was $904 Mil.
Total Current Liabilities was $4,204 Mil.
Long-Term Debt was $15,767 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)|
|=||(1322 / 15868)||/||(1214 / 11295)|
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)|
|=||(1291 / 11295)||/||(1241 / 15868)|
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 - (8582 + 22367) / 40665)||/||(1 - (7596 + 19851) / 33902)|
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))|
|=||(1341 / (1341 + 19851))||/||(1633 / (1633 + 22367))|
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)|
|=||(1042 / 15868)||/||(904 / 11295)|
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)|
|=||((19900 + 4859) / 40665)||/||((15767 + 4204) / 33902)|
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|
|=||(134 - 2||-||1510)||/||40665|
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 -2.32 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