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GuruFocus has detected 2 Warning Signs with Encana Corp $ECA.
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Encana Corp (NYSE:ECA)
Beneish M-Score
-2.85 (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.

Encana Corp has a M-score of -2.87 suggests that the company is not a manipulator.

ECA' s Beneish M-Score Range Over the Past 10 Years
Min: -4.75   Max: 19.37
Current: -2.85

-4.75
19.37

During the past 13 years, the highest Beneish M-Score of Encana Corp was 19.37. The lowest was -4.75. And the median was -2.63.


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 Encana 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 * 1.147+0.528 * 1.1307+0.404 * 1.0688+0.892 * 0.8818+0.115 * 1.4243
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.1582+4.679 * -0.1259-0.327 * 0.844
=-2.87

* 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 $619 Mil.
Revenue was 1297 + 822 + 979 + 364 = $3,462 Mil.
Gross Profit was 753 + 221 + 415 + -124 = $1,265 Mil.
Total Current Assets was $1,693 Mil.
Total Assets was $14,695 Mil.
Property, Plant and Equipment(Net PPE) was $8,348 Mil.
Depreciation, Depletion and Amortization(DDA) was $785 Mil.
Selling, General & Admin. Expense(SGA) was $288 Mil.
Total Current Liabilities was $1,319 Mil.
Long-Term Debt was $4,489 Mil.
Net Income was 431 + -281 + 317 + -601 = $-134 Mil.
Non Operating Income was 25 + 1325 + 338 + -546 = $1,142 Mil.
Cash Flow from Operations was 106 + 199 + 186 + 83 = $574 Mil.
Accounts Receivable was $612 Mil.
Revenue was 753 + 1031 + 1312 + 830 = $3,926 Mil.
Gross Profit was 222 + 468 + 716 + 216 = $1,622 Mil.
Total Current Assets was $1,501 Mil.
Total Assets was $15,203 Mil.
Property, Plant and Equipment(Net PPE) was $9,197 Mil.
Depreciation, Depletion and Amortization(DDA) was $1,283 Mil.
Selling, General & Admin. Expense(SGA) was $282 Mil.
Total Current Liabilities was $1,359 Mil.
Long-Term Debt was $5,760 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)
=(619 / 3462) / (612 / 3926)
=0.17879838 / 0.15588385
=1.147

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)
=(1622 / 3926) / (1265 / 3462)
=0.41314315 / 0.36539573
=1.1307

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 - (1693 + 8348) / 14695) / (1 - (1501 + 9197) / 15203)
=0.31670636 / 0.29632309
=1.0688

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
=3462 / 3926
=0.8818

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))
=(1283 / (1283 + 9197)) / (785 / (785 + 8348))
=0.12242366 / 0.08595204
=1.4243

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)
=(288 / 3462) / (282 / 3926)
=0.08318891 / 0.07182883
=1.1582

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)
=((4489 + 1319) / 14695) / ((5760 + 1359) / 15203)
=0.39523647 / 0.46826284
=0.844

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
=(-134 - 1142 - 574) / 14695
=-0.1259

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.

Encana Corp has a M-score of -2.87 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.

Encana Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 1.01160.60721.63731.17120.92321.49570.8531.03620.92391.5765
GMI 1.59150.63141.18720.87661.02511.26731.03240.90581.24071.7801
AQI 1.561.45220.26671.31851.76291.45351.01410.79131.78391.1788
SGI 1.36770.99330.50190.79810.95460.60941.13531.36890.55140.6599
DEPI 1.03310.85670.90551.8960.52550.74481.23841.52770.67331.3739
SGAI 0.29181.17282.12670.95091.01291.83780.98650.54411.52511.7028
LVGI 1.33440.6861.30440.83371.63471.09971.04150.75461.09280.9206
TATA -0.0913-0.0497-0.17620.0033-0.1609-0.0683-0.0949-0.0903-0.3683-0.2151
M-score -2.01-3.04-3.66-2.26-3.29-2.57-2.90-2.45-4.39-2.83

Encana Corp Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.03620.68330.59430.74750.92391.22321.60961.49281.57651.147
GMI 0.90581.00750.99821.03091.24071.3081.37311.60871.78011.1307
AQI 0.79130.87271.15312.2751.78391.87341.74741.4571.17881.0688
SGI 1.36891.10241.05130.78530.55140.53230.52280.55390.65990.8818
DEPI 1.52771.30371.06521.11630.67330.86381.03651.19131.37391.4243
SGAI 0.54410.60410.58390.80311.52511.78391.75051.89711.70281.1582
LVGI 0.75460.84630.93271.20911.09281.10661.19410.85040.92060.844
TATA -0.0903-0.0544-0.01470.0571-0.3683-0.4693-0.494-0.5433-0.2151-0.1259
M-score -2.45-2.83-2.71-2.13-4.39-4.56-4.35-4.54-2.83-2.87
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