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GuruFocus has detected 4 Warning Signs with CF Industries Holdings Inc $CF.
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CF Industries Holdings Inc (NYSE:CF)
Beneish M-Score
-2.58 (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.

CF Industries Holdings Inc has a M-score of -2.58 suggests that the company is not a manipulator.

CF' s Beneish M-Score Range Over the Past 10 Years
Min: -3.28   Max: -0.01
Current: -2.58

-3.28
-0.01

During the past 13 years, the highest Beneish M-Score of CF Industries Holdings Inc was -0.01. The lowest was -3.28. 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 CF Industries Holdings 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 * 1.1276+0.528 * 1.5777+0.404 * 0.9644+0.892 * 0.853+0.115 * 0.7449
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.6229+4.679 * -0.0515-0.327 * 0.9991
=-2.58

* 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 $252 Mil.
Revenue was 1037 + 867 + 680 + 1134 = $3,718 Mil.
Gross Profit was 106 + 94 + 2 + 527 = $729 Mil.
Total Current Assets was $2,805 Mil.
Total Assets was $15,185 Mil.
Property, Plant and Equipment(Net PPE) was $9,552 Mil.
Depreciation, Depletion and Amortization(DDA) was $737 Mil.
Selling, General & Admin. Expense(SGA) was $340 Mil.
Total Current Liabilities was $853 Mil.
Long-Term Debt was $5,780 Mil.
Net Income was -23 + -320 + -30 + 47 = $-326 Mil.
Non Operating Income was -4 + -166 + -1 + 0 = $-171 Mil.
Cash Flow from Operations was 356 + 26 + 145 + 100 = $627 Mil.
Accounts Receivable was $262 Mil.
Revenue was 1004 + 1115.8 + 927.4 + 1311.5 = $4,359 Mil.
Gross Profit was 217 + 280.4 + 165 + 685.9 = $1,348 Mil.
Total Current Assets was $3,520 Mil.
Total Assets was $15,581 Mil.
Property, Plant and Equipment(Net PPE) was $9,052 Mil.
Depreciation, Depletion and Amortization(DDA) was $510 Mil.
Selling, General & Admin. Expense(SGA) was $246 Mil.
Total Current Liabilities was $1,273 Mil.
Long-Term Debt was $5,539 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)
=(252 / 3718) / (262 / 4358.7)
=0.06777838 / 0.06010967
=1.1276

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)
=(1348.3 / 4358.7) / (729 / 3718)
=0.30933535 / 0.19607316
=1.5777

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 - (2805 + 9552) / 15185) / (1 - (3520 + 9052) / 15581)
=0.18623642 / 0.19311983
=0.9644

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
=3718 / 4358.7
=0.853

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))
=(510.2 / (510.2 + 9052)) / (737 / (737 + 9552))
=0.05335592 / 0.0716299
=0.7449

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)
=(340 / 3718) / (245.6 / 4358.7)
=0.09144701 / 0.05634708
=1.6229

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)
=((5780 + 853) / 15185) / ((5539 + 1273) / 15581)
=0.43681264 / 0.43719915
=0.9991

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
=(-326 - -171 - 627) / 15185
=-0.0515

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.

CF Industries Holdings Inc has a M-score of -2.58 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.

CF Industries Holdings Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.96280.82791.43720.93880.73320.79061.17670.95261.24621.2626
GMI 0.29790.77940.9691.08180.62650.9311.1081.22771.04421.5753
AQI 1.16752.24541.36762.37940.96150.88761.08630.76320.85520.7737
SGI 1.3561.42240.66521.52011.53791.0010.89690.86640.90830.8553
DEPI 1.14620.90291.17091.23520.91171.03161.06781.37211.24710.8102
SGAI 0.66460.74521.30421.10970.79671.16651.21921.05621.64311.8205
LVGI 1.13711.08730.56681.70540.89120.84981.46591.33651.08740.7994
TATA -0.13140.0679-0.1319-0.0978-0.0602-0.05190.0049-0.0005-0.0392-0.0482
M-score -3.08-1.55-2.75-2.15-2.68-2.97-2.48-2.70-2.66-2.48

CF Industries Holdings Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.95260.89460.86181.76721.24621.64181.29130.9211.26261.1276
GMI 1.22771.13110.95421.02371.04421.24061.47471.48731.57531.5777
AQI 0.76321.05250.9880.87690.85520.69740.65560.77390.77370.9644
SGI 0.86640.86590.87560.90850.90830.9550.94960.89220.85530.853
DEPI 1.37211.36971.34421.37661.24711.19251.01230.89820.81020.7449
SGAI 1.05621.06221.07211.01841.64311.71113.00763.14721.82051.6229
LVGI 1.33651.06381.03431.10271.08740.85050.8240.78010.79940.9991
TATA -0.0008-0.0232-0.0355-0.0288-0.0392-0.0333-0.0608-0.0425-0.0479-0.0515
M-score -2.70-2.70-2.90-2.02-2.66-2.13-2.72-2.99-2.48-2.58
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