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GuruFocus has detected 3 Warning Signs with Archer-Daniels Midland Co $ADM.
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Archer-Daniels Midland Co (NYSE:ADM)
Beneish M-Score
-2.71 (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.

Archer-Daniels Midland Co has a M-score of -2.71 suggests that the company is not a manipulator.

ADM' s Beneish M-Score Range Over the Past 10 Years
Min: -3.35   Max: -1.22
Current: -2.71

-3.35
-1.22

During the past 13 years, the highest Beneish M-Score of Archer-Daniels Midland Co was -1.22. The lowest was -3.35. And the median was -2.56.


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 Archer-Daniels Midland Co 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 * 0.9173+0.528 * 0.96+0.404 * 1.0641+0.892 * 0.9748+0.115 * 0.9919
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0565+4.679 * -0.0245-0.327 * 1.0462
=-2.71

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Mar17) TTM:Last Year (Mar16) TTM:
Accounts Receivable was $1,757 Mil.
Revenue was 14988 + 16501 + 15832 + 15629 = $62,950 Mil.
Gross Profit was 868 + 1026 + 1105 + 757 = $3,756 Mil.
Total Current Assets was $20,486 Mil.
Total Assets was $39,630 Mil.
Property, Plant and Equipment(Net PPE) was $9,771 Mil.
Depreciation, Depletion and Amortization(DDA) was $894 Mil.
Selling, General & Admin. Expense(SGA) was $2,072 Mil.
Total Current Liabilities was $13,602 Mil.
Long-Term Debt was $5,956 Mil.
Net Income was 339 + 424 + 341 + 284 = $1,388 Mil.
Non Operating Income was 169 + 129 + -9 + 212 = $501 Mil.
Cash Flow from Operations was 409 + 319 + 1522 + -391 = $1,859 Mil.
Accounts Receivable was $1,965 Mil.
Revenue was 14384 + 16445 + 16565 + 17186 = $64,580 Mil.
Gross Profit was 781 + 865 + 1089 + 964 = $3,699 Mil.
Total Current Assets was $20,970 Mil.
Total Assets was $39,681 Mil.
Property, Plant and Equipment(Net PPE) was $9,891 Mil.
Depreciation, Depletion and Amortization(DDA) was $897 Mil.
Selling, General & Admin. Expense(SGA) was $2,012 Mil.
Total Current Liabilities was $12,867 Mil.
Long-Term Debt was $5,851 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)
=(1757 / 62950) / (1965 / 64580)
=0.02791104 / 0.03042738
=0.9173

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)
=(3699 / 64580) / (3756 / 62950)
=0.05727779 / 0.0596664
=0.96

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 - (20486 + 9771) / 39630) / (1 - (20970 + 9891) / 39681)
=0.23651274 / 0.22227262
=1.0641

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
=62950 / 64580
=0.9748

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))
=(897 / (897 + 9891)) / (894 / (894 + 9771))
=0.08314794 / 0.0838256
=0.9919

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)
=(2072 / 62950) / (2012 / 64580)
=0.03291501 / 0.03115516
=1.0565

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)
=((5956 + 13602) / 39630) / ((5851 + 12867) / 39681)
=0.49351501 / 0.4717119
=1.0462

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
=(1388 - 501 - 1859) / 39630
=-0.0245

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.

Archer-Daniels Midland Co has a M-score of -2.71 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.

Archer-Daniels Midland Co Annual Data

Jun07Jun08Jun09Jun10Jun11Jun12Dec13Dec14Dec15Dec16
DSRI 1.19081.13050.64230.93950.60050.64810.92950.92760.77091.1902
GMI 1.1021.33630.93140.94831.16891.29380.95130.73750.98891.0049
AQI 0.81340.76121.10731.10530.85420.94890.971.58761.14381.0683
SGI 1.20281.58610.99130.89131.30791.10361.00860.90420.83380.9209
DEPI 1.05671.13671.02850.94281.12131.06240.96670.98911.01270.973
SGAI 0.8330.74871.00381.11090.88110.91451.07261.21531.26521.0891
LVGI 1.04611.19840.86650.94381.03020.99870.94771.00030.99991.0303
TATA 0.02080.1168-0.125-0.03740.0875-0.052-0.0935-0.0735-0.0289-0.0146
M-score -2.03-1.22-3.35-2.80-2.11-2.80-3.01-2.92-2.97-2.44

Archer-Daniels Midland Co Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.83370.64741.17650.77091.16581.18681.2241.19020.9173
GMI 0.64410.7030.83230.98891.16261.22121.13351.0090.96
AQI 1.55081.54121.56451.14381.1611.18021.22291.06831.0641
SGI 0.87880.84020.85440.83380.82780.85510.86330.92090.9748
DEPI 0.98560.96470.95911.01270.99921.00140.99970.9730.9919
SGAI 1.35151.50511.50751.26021.19261.09831.07641.08541.0565
LVGI 1.04641.07351.06930.99990.99331.03940.99341.03031.0462
TATA -0.0816-0.0661-0.0049-0.0287-0.0327-0.0177-0.0399-0.0146-0.0245
M-score -3.17-3.31-2.45-2.96-2.51-2.36-2.43-2.44-2.71
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