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GuruFocus has detected 3 Warning Signs with Chesapeake Energy Corp $CHK.
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Chesapeake Energy Corp (NYSE:CHK)
Beneish M-Score
-3.93 (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.

Chesapeake Energy Corp has a M-score of -3.93 suggests that the company is not a manipulator.

CHK' s Beneish M-Score Range Over the Past 10 Years
Min: -18.99   Max: 27.92
Current: -3.93

-18.99
27.92

During the past 13 years, the highest Beneish M-Score of Chesapeake Energy Corp was 27.92. The lowest was -18.99. And the median was -2.55.


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 Chesapeake Energy 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 * 1.3345+0.528 * 1.2875+0.404 * 0.6197+0.892 * 0.7542+0.115 * 1.2972
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.7029+4.679 * -0.3299-0.327 * 1.2518
=-3.93

* 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 $943 Mil.
Revenue was 2753 + 2021 + 2276 + 1622 = $8,672 Mil.
Gross Profit was 913 + -3354 + 1622 + -267 = $-1,086 Mil.
Total Current Assets was $1,360 Mil.
Total Assets was $11,699 Mil.
Property, Plant and Equipment(Net PPE) was $10,068 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,025 Mil.
Selling, General & Admin. Expense(SGA) was $-1,892 Mil.
Total Current Liabilities was $2,788 Mil.
Long-Term Debt was $9,509 Mil.
Net Income was 140 + -575 + -1155 + -1750 = $-3,340 Mil.
Non Operating Income was 27 + 22 + 85 + 69 = $203 Mil.
Cash Flow from Operations was 99 + -254 + 376 + 95 = $316 Mil.
Accounts Receivable was $937 Mil.
Revenue was 1953 + 2649 + 3376 + 3521 = $11,499 Mil.
Gross Profit was 305 + -5403 + 2617 + 627 = $-1,854 Mil.
Total Current Assets was $1,492 Mil.
Total Assets was $15,357 Mil.
Property, Plant and Equipment(Net PPE) was $13,291 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,810 Mil.
Selling, General & Admin. Expense(SGA) was $-3,569 Mil.
Total Current Liabilities was $2,833 Mil.
Long-Term Debt was $10,062 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)
=(943 / 8672) / (937 / 11499)
=0.10874077 / 0.08148535
=1.3345

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)
=(-1854 / 11499) / (-1086 / 8672)
=-0.16123141 / -0.12523063
=1.2875

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 - (1360 + 10068) / 11699) / (1 - (1492 + 13291) / 15357)
=0.02316437 / 0.03737709
=0.6197

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
=8672 / 11499
=0.7542

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))
=(1810 / (1810 + 13291)) / (1025 / (1025 + 10068))
=0.11985961 / 0.09240061
=1.2972

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)
=(-1892 / 8672) / (-3569 / 11499)
=-0.21817343 / -0.31037482
=0.7029

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)
=((9509 + 2788) / 11699) / ((10062 + 2833) / 15357)
=1.05111548 / 0.83968223
=1.2518

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
=(-3340 - 203 - 316) / 11699
=-0.3299

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.

Chesapeake Energy Corp has a M-score of -3.93 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.

Chesapeake Energy Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.19350.8271.51111.2251.02160.78170.62580.55010.9411.9569
GMI 1.09980.90611.36521.07921.18181.04881.32081.0483-2.64910.5192
AQI 0.58520.790.98481.62941.09890.79240.66040.79381.64260.6868
SGI 1.0651.49060.66231.21621.24221.05861.54931.21190.5520.6167
DEPI 0.95411.07531.06071.20080.95510.7070.96970.88130.611.4274
SGAI 1.04152.32330.23411.06720.97570.92050.55140.5814-20.0360.8692
LVGI 1.17560.97551.15090.91990.91871.05910.98240.93661.95961.2901
TATA -0.116-0.1183-0.3359-0.0984-0.0995-0.1112-0.0836-0.0611-0.9247-0.3428
M-score -2.97-3.10-3.61-2.21-2.55-3.25-2.61-2.97-5.67-3.95

Chesapeake Energy Corp Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.55010.6160.69980.66160.9411.05621.29931.42871.95691.3345
GMI 1.04831.06170.97870.8292-2.6491-1.7675-0.9372-0.77520.51921.2875
AQI 0.79380.90511.44971.93191.64262.17761.68620.92030.68680.6197
SGI 1.21191.02870.92850.78760.5520.53990.48820.49020.61670.7542
DEPI 0.88130.76310.6980.54760.610.78010.95641.33481.42741.2972
SGAI 0.58140.68230.73028.061-20.036-22.1072-26.3584-3.90810.86920.7029
LVGI 0.93661.06491.30891.68621.95961.80511.66561.40931.29011.2518
TATA -0.0611-0.1668-0.3207-0.6403-0.9247-0.8102-0.738-0.5309-0.3428-0.3299
M-score -2.97-3.59-4.24-7.18-5.67-3.93-2.38-5.25-3.95-3.93
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