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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 NorthWestern Corp was 4.54. The lowest was -2.94. And the median was -2.51.
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 NorthWestern 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 * 0.998||+||0.528 * 1.0174||+||0.404 * 1.0467||+||0.892 * 1.0354||+||0.115 * 0.9449|
|-||0.172 * SGAI||+||4.679 * TATA||-||0.327 * LVGI|
|-||0.172 * 0.9834||+||4.679 * -0.0237||-||0.327 * 0.984|
* 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 $160 Mil.|
Revenue was 330.59 + 300.998 + 293.12 + 332.539 = $1,257 Mil.
Gross Profit was 222.9 + 204.842 + 211.427 + 217.105 = $856 Mil.
Total Current Assets was $280 Mil.
Total Assets was $5,499 Mil.
Property, Plant and Equipment(Net PPE) was $4,215 Mil.
Depreciation, Depletion and Amortization(DDA) was $159 Mil.
Selling, General & Admin. Expense(SGA) was $303 Mil.
Total Current Liabilities was $614 Mil.
Long-Term Debt was $1,818 Mil.
Net Income was 45.944 + 44.605 + 35.569 + 38.054 = $164 Mil.
Non Operating Income was 1.372 + -0.121 + 1.195 + 3.102 = $6 Mil.
Cash Flow from Operations was 31.024 + 116.994 + -1.142 + 142.136 = $289 Mil.
|Accounts Receivable was $154 Mil.
Revenue was 324.989 + 272.739 + 270.56 + 346.011 = $1,214 Mil.
Gross Profit was 217.62 + 199.162 + 191.033 + 233.62 = $841 Mil.
Total Current Assets was $287 Mil.
Total Assets was $5,265 Mil.
Property, Plant and Equipment(Net PPE) was $4,059 Mil.
Depreciation, Depletion and Amortization(DDA) was $145 Mil.
Selling, General & Admin. Expense(SGA) was $297 Mil.
Total Current Liabilities was $571 Mil.
Long-Term Debt was $1,795 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)|
|=||(159.556 / 1257.247)||/||(154.41 / 1214.299)|
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)|
|=||(841.435 / 1214.299)||/||(856.274 / 1257.247)|
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 - (280.195 + 4214.892) / 5499.321)||/||(1 - (286.66 + 4059.499) / 5264.695)|
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))|
|=||(144.702 / (144.702 + 4059.499))||/||(159.336 / (159.336 + 4214.892))|
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)|
|=||(302.893 / 1257.247)||/||(297.475 / 1214.299)|
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)|
|=||((1817.684 + 613.832) / 5499.321)||/||((1794.508 + 571.2) / 5264.695)|
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|
|=||(164.172 - 5.548||-||289.012)||/||5499.321|
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.
NorthWestern Corp has a M-score of -2.53 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
NorthWestern Corp Annual Data
NorthWestern Corp Quarterly Data