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GuruFocus has detected 6 Warning Signs with Norfolk Southern Corp $NSC.
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Norfolk Southern Corp (NYSE:NSC)
Beneish M-Score
-2.67 (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.

Norfolk Southern Corp has a M-score of -2.67 suggests that the company is not a manipulator.

NSC' s Beneish M-Score Range Over the Past 10 Years
Min: -3.16   Max: 0.83
Current: -2.67

-3.16
0.83

During the past 13 years, the highest Beneish M-Score of Norfolk Southern Corp was 0.83. The lowest was -3.16. And the median was -2.64.


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 Norfolk Southern Corp 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 * 1.0619+0.528 * 0.9416+0.404 * 1.0583+0.892 * 0.9407+0.115 * 1.0531
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0017+4.679 * -0.0409-0.327 * 1.0017
=-2.67

* 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 $945 Mil.
Revenue was 2490 + 2524 + 2454 + 2420 = $9,888 Mil.
Gross Profit was 1682 + 1769 + 1694 + 1698 = $6,843 Mil.
Total Current Assets was $2,291 Mil.
Total Assets was $34,892 Mil.
Property, Plant and Equipment(Net PPE) was $29,751 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,030 Mil.
Selling, General & Admin. Expense(SGA) was $2,743 Mil.
Total Current Liabilities was $2,339 Mil.
Long-Term Debt was $9,562 Mil.
Net Income was 416 + 460 + 405 + 387 = $1,668 Mil.
Non Operating Income was 12 + 29 + 4 + 16 = $61 Mil.
Cash Flow from Operations was 722 + 880 + 553 + 879 = $3,034 Mil.
Accounts Receivable was $946 Mil.
Revenue was 2518 + 2713 + 2713 + 2567 = $10,511 Mil.
Gross Profit was 1631 + 1799 + 1785 + 1634 = $6,849 Mil.
Total Current Assets was $2,512 Mil.
Total Assets was $34,139 Mil.
Property, Plant and Equipment(Net PPE) was $28,992 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,059 Mil.
Selling, General & Admin. Expense(SGA) was $2,911 Mil.
Total Current Liabilities was $2,231 Mil.
Long-Term Debt was $9,393 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)
=(945 / 9888) / (946 / 10511)
=0.09557039 / 0.09000095
=1.0619

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)
=(6849 / 10511) / (6843 / 9888)
=0.65160308 / 0.69205097
=0.9416

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 - (2291 + 29751) / 34892) / (1 - (2512 + 28992) / 34139)
=0.08168061 / 0.07718445
=1.0583

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
=9888 / 10511
=0.9407

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))
=(1059 / (1059 + 28992)) / (1030 / (1030 + 29751))
=0.03524009 / 0.0334622
=1.0531

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)
=(2743 / 9888) / (2911 / 10511)
=0.27740696 / 0.27694796
=1.0017

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)
=((9562 + 2339) / 34892) / ((9393 + 2231) / 34139)
=0.34108105 / 0.34049035
=1.0017

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
=(1668 - 61 - 3034) / 34892
=-0.0409

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.

Norfolk Southern Corp has a M-score of -2.67 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.

Norfolk Southern Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.94710.81711.17790.88231.07871.09810.90650.99670.99161.0619
GMI 1.0061.01680.94471.0011.03310.99510.99370.99920.980.9416
AQI 1.13570.70651.16180.97720.91730.95921.09170.9660.93931.0583
SGI 1.00271.13030.74751.19411.1740.98821.01861.03370.90420.9407
DEPI 0.9770.99430.98231.04781.00110.99161.03411.00230.94691.0531
SGAI 0.79460.93051.19680.94450.93541.00720.99570.93361.11121.0017
LVGI 0.96461.03680.98170.99131.03861.08770.99580.93081.06011.0017
TATA -0.0351-0.0422-0.0348-0.0486-0.0515-0.0477-0.0431-0.0304-0.0424-0.0409
M-score -2.59-2.84-2.70-2.63-2.51-2.67-2.71-2.58-2.85-2.67

Norfolk Southern Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
DSRI 0.96710.99670.90580.96241.07110.99161.03351.03230.95351.0619
GMI 0.98530.99920.98690.98770.98520.980.96620.9580.94920.9416
AQI 1.1390.9661.0080.98320.950.93930.91970.9310.96981.0583
SGI 1.05311.03371.02730.9770.93360.90420.90110.90440.91280.9407
DEPI 0.99951.00231.0051.01220.99010.94690.94850.94740.98151.0531
SGAI 0.94220.93360.96621.02281.06341.11121.07621.04761.0431.0017
LVGI 0.95940.93080.93570.9841.0141.06011.03431.01941.01311.0017
TATA -0.0341-0.0304-0.0337-0.0377-0.0349-0.0424-0.0477-0.0381-0.0423-0.0409
M-score -2.55-2.58-2.68-2.72-2.68-2.85-2.84-2.78-2.85-2.67
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