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GuruFocus has detected 4 Warning Signs with AK Steel Holding Corp $AKS.
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AK Steel Holding Corp (NYSE:AKS)
Beneish M-Score
-2.62 (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.

AK Steel Holding Corp has a M-score of -2.62 suggests that the company is not a manipulator.

AKS' s Beneish M-Score Range Over the Past 10 Years
Min: -4.27   Max: -0.82
Current: -2.62

-4.27
-0.82

During the past 13 years, the highest Beneish M-Score of AK Steel Holding Corp was -0.82. The lowest was -4.27. And the median was -2.60.


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 AK Steel Holding 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 * 1.1758+0.528 * 0.6913+0.404 * 1.0511+0.892 * 0.9128+0.115 * 0.9471
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.0069+4.679 * -0.0302-0.327 * 0.7947
=-2.62

* 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 $525 Mil.
Revenue was 1533.4 + 1418.6 + 1452.9 + 1492.2 = $5,897 Mil.
Gross Profit was 222.6 + 238.5 + 258.8 + 167.2 = $887 Mil.
Total Current Assets was $1,924 Mil.
Total Assets was $4,104 Mil.
Property, Plant and Equipment(Net PPE) was $1,976 Mil.
Depreciation, Depletion and Amortization(DDA) was $238 Mil.
Selling, General & Admin. Expense(SGA) was $317 Mil.
Total Current Liabilities was $1,038 Mil.
Long-Term Debt was $1,685 Mil.
Net Income was 62.5 + -62.4 + 50.9 + 17.3 = $68 Mil.
Non Operating Income was -7.8 + 0.7 + -7 + 2.1 = $-12 Mil.
Cash Flow from Operations was 36.3 + 16.7 + 14.9 + 136.3 = $204 Mil.
Accounts Receivable was $489 Mil.
Revenue was 1518.8 + 1542.7 + 1709.9 + 1689.4 = $6,461 Mil.
Gross Profit was 153.3 + 222.9 + 185.5 + 110.2 = $672 Mil.
Total Current Assets was $1,742 Mil.
Total Assets was $3,987 Mil.
Property, Plant and Equipment(Net PPE) was $2,056 Mil.
Depreciation, Depletion and Amortization(DDA) was $233 Mil.
Selling, General & Admin. Expense(SGA) was $345 Mil.
Total Current Liabilities was $992 Mil.
Long-Term Debt was $2,336 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)
=(524.5 / 5897.1) / (488.7 / 6460.8)
=0.08894202 / 0.07564079
=1.1758

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)
=(671.9 / 6460.8) / (887.1 / 5897.1)
=0.10399641 / 0.15042987
=0.6913

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 - (1923.7 + 1976) / 4104.4) / (1 - (1742.4 + 2055.7) / 3987.3)
=0.04987331 / 0.04745066
=1.0511

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
=5897.1 / 6460.8
=0.9128

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))
=(233.3 / (233.3 + 2055.7)) / (238.3 / (238.3 + 1976))
=0.10192224 / 0.10761866
=0.9471

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)
=(316.8 / 5897.1) / (344.7 / 6460.8)
=0.05372132 / 0.05335253
=1.0069

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)
=((1684.5 + 1037.9) / 4104.4) / ((2336.4 + 991.7) / 3987.3)
=0.66328818 / 0.83467509
=0.7947

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
=(68.3 - -12 - 204.2) / 4104.4
=-0.0302

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.

AK Steel Holding Corp has a M-score of -2.62 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.

AK Steel Holding Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.83950.63771.84790.71211.07830.91561.18051.05040.67121.1303
GMI 0.6561.02611.87961.47340.81711.00250.80081.08490.77520.7103
AQI 0.89410.97331.18521.14681.25950.50821.09291.08430.3451.0447
SGI 1.15391.09160.53331.4641.08370.91740.93881.16791.02880.8789
DEPI 0.94010.98610.95131.03821.12550.89890.93971.0970.89420.9771
SGAI 0.93260.91651.6160.72312.26750.71910.44030.98152.14751.03
LVGI 0.84320.93341.0791.13321.12511.41861.1381.13331.13190.799
TATA -0.0295-0.0173-0.03330.00270.0068-0.19540.0180.0512-0.1011-0.0762
M-score -2.80-2.78-1.87-2.00-2.54-3.84-2.31-1.99-3.87-2.90

AK Steel Holding Corp Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.05040.93570.7730.65050.67120.90480.88721.05651.13031.1758
GMI 1.08490.81650.86090.88420.77520.82880.71940.64870.71030.6913
AQI 1.08430.61360.50630.50090.3450.62871.30790.76521.04471.0511
SGI 1.16791.23081.23141.19671.02880.940.89080.84030.87890.9128
DEPI 1.0971.06781.03960.83830.89420.9380.97881.02170.97710.9471
SGAI 0.98151.19081.73412.04542.14752.09181.83662.01191.031.0069
LVGI 1.13331.13621.08361.11981.13191.05210.9390.91650.7990.7947
TATA 0.05120.0385-0.0389-0.08-0.1011-0.1334-0.1278-0.0877-0.0762-0.0302
M-score -1.99-2.48-3.09-3.50-3.87-3.70-3.43-3.41-2.90-2.62
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