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GuruFocus has detected 6 Warning Signs with Frontline Ltd $FRO.
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Frontline Ltd (NYSE:FRO)
Beneish M-Score
-2.64 (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.

Frontline Ltd has a M-score of -2.64 suggests that the company is not a manipulator.

FRO' s Beneish M-Score Range Over the Past 10 Years
Min: -4.35   Max: 23.67
Current: -2.64

-4.35
23.67

During the past 13 years, the highest Beneish M-Score of Frontline Ltd was 23.67. The lowest was -4.35. And the median was -2.51.


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 Frontline Ltd 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+0.528 * 1.1827+0.404 * 0.9267+0.892 * 1.1887+0.115 * 0.6746
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 1.4602+4.679 * -0.0582-0.327 * 1.0271
=-2.64

* 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 $38.6 Mil.
Revenue was 177.127 + 178.29 + 157.157 + 191.756 = $704.3 Mil.
Gross Profit was 85.315 + 73.516 + 74.286 + 109.434 = $342.6 Mil.
Total Current Assets was $347.9 Mil.
Total Assets was $3,149.7 Mil.
Property, Plant and Equipment(Net PPE) was $2,543.5 Mil.
Depreciation, Depletion and Amortization(DDA) was $137.9 Mil.
Selling, General & Admin. Expense(SGA) was $34.8 Mil.
Total Current Liabilities was $230.5 Mil.
Long-Term Debt was $1,408.3 Mil.
Net Income was 27.02 + 18.321 + 5.471 + 14.312 = $65.1 Mil.
Non Operating Income was 0.746 + 12.693 + 0.491 + -9.945 = $4.0 Mil.
Cash Flow from Operations was 79.784 + 33.67 + 48.531 + 82.346 = $244.3 Mil.
Accounts Receivable was $0.0 Mil.
Revenue was 227.103 + 154.023 + 107.456 + 103.937 = $592.5 Mil.
Gross Profit was 148.068 + 92.658 + 49.083 + 51.005 = $340.8 Mil.
Total Current Assets was $446.0 Mil.
Total Assets was $2,979.5 Mil.
Property, Plant and Equipment(Net PPE) was $2,270.0 Mil.
Depreciation, Depletion and Amortization(DDA) was $81.6 Mil.
Selling, General & Admin. Expense(SGA) was $20.1 Mil.
Total Current Liabilities was $226.5 Mil.
Long-Term Debt was $1,282.9 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)
=(38.587 / 704.33) / (0 / 592.519)
=0.0547854 / 0
=1

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)
=(340.814 / 592.519) / (342.551 / 704.33)
=0.57519506 / 0.48635015
=1.1827

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 - (347.936 + 2543.547) / 3149.689) / (1 - (445.952 + 2269.992) / 2979.513)
=0.08197825 / 0.08846043
=0.9267

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
=704.33 / 592.519
=1.1887

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))
=(81.557 / (81.557 + 2269.992)) / (137.859 / (137.859 + 2543.547))
=0.03468225 / 0.05141295
=0.6746

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)
=(34.821 / 704.33) / (20.061 / 592.519)
=0.04943847 / 0.03385714
=1.4602

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)
=((1408.283 + 230.508) / 3149.689) / ((1282.901 + 226.505) / 2979.513)
=0.52030248 / 0.50659487
=1.0271

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
=(65.124 - 3.985 - 244.331) / 3149.689
=-0.0582

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.

Frontline Ltd has a M-score of -2.64 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.

Frontline Ltd Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.89020.8021.48871.20961.31570.69561.99710.62372.26870.5205
GMI 1.10760.90691.37390.91221.78621.38430.73930.76470.69560.9793
AQI 1.7870.57070.50181.27041.33041.231.43214.93170.23680.9509
SGI 1.11951.26290.49691.04390.62090.74060.24991.8061.89781.6436
DEPI 0.77731.09350.89671.19470.49761.57823.37290.86391.18940.4183
SGAI 0.7324.04310.06426.73310.75071.17020.46430.71071.12812.1288
LVGI 1.1970.93680.96911.00661.1021.04281.0440.29671.75090.9918
TATA 0.0022-0.0302-0.0645-0.0385-0.3233-0.1210.02260.0141-0.0132-0.0547
M-score -2.13-3.28-2.63-3.33-3.54-3.24-1.74-0.31-1.29-2.89

Frontline Ltd Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 0.62371112.268710.395910.52051
GMI 0.76471.03120.7710.65520.69560.74661.11391.4960.97931.1827
AQI 4.93171.4481.0870.79130.23680.78291.4920.90990.95090.9267
SGI 1.8060.92890.85530.66071.89783.58354.52625.97671.64361.1887
DEPI 0.86390.89222.5806-1.36471.18940.75590.1733-0.47670.41830.6746
SGAI 0.7107-0.6792-1.8212-2.81531.1281-1.976-0.5054-0.28722.12881.4602
LVGI 0.29671.00540.60370.65691.75090.50760.8180.71040.99181.0271
TATA 0.01410.03310.11690.2494-0.0132-0.011-0.0257-0.0522-0.0547-0.0582
M-score -0.31-1.92-1.35-1.39-1.290.200.472.09-2.89-2.64
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