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GuruFocus has detected 6 Warning Signs with HRG Group Inc $HRG.
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HRG Group Inc (NYSE:HRG)
Beneish M-Score
-2.66 (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.

HRG Group Inc has a M-score of -2.66 suggests that the company is not a manipulator.

HRG' s Beneish M-Score Range Over the Past 10 Years
Min: -6.48   Max: 641.18
Current: -2.66

-6.48
641.18

During the past 13 years, the highest Beneish M-Score of HRG Group Inc was 641.18. The lowest was -6.48. And the median was -2.37.


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 HRG Group 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 * 0.9068+0.528 * 0.9001+0.404 * 1.016+0.892 * 1.0447+0.115 * 0.8656
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9439+4.679 * -0.0257-0.327 * 0.8834
=-2.66

* 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 $2,219 Mil.
Revenue was 1216.1 + 1189.6 + 1265.3 + 1447.1 = $5,118 Mil.
Gross Profit was 501.4 + 427.8 + 536.7 + 607.1 = $2,073 Mil.
Total Current Assets was $3,375 Mil.
Total Assets was $36,697 Mil.
Property, Plant and Equipment(Net PPE) was $662 Mil.
Depreciation, Depletion and Amortization(DDA) was $186 Mil.
Selling, General & Admin. Expense(SGA) was $1,352 Mil.
Total Current Liabilities was $849 Mil.
Long-Term Debt was $5,624 Mil.
Net Income was -82.1 + 212.2 + -7.3 + -132.9 = $-10 Mil.
Non Operating Income was -2 + 1.4 + -102.9 + -3.3 = $-107 Mil.
Cash Flow from Operations was 28.5 + 80.7 + 526.3 + 403.5 = $1,039 Mil.
Accounts Receivable was $2,342 Mil.
Revenue was 1267.3 + 1209.4 + 1195 + 1227.2 = $4,899 Mil.
Gross Profit was 520.5 + 431.3 + 420.5 + 413.6 = $1,786 Mil.
Total Current Assets was $3,732 Mil.
Total Assets was $35,455 Mil.
Property, Plant and Equipment(Net PPE) was $665 Mil.
Depreciation, Depletion and Amortization(DDA) was $156 Mil.
Selling, General & Admin. Expense(SGA) was $1,371 Mil.
Total Current Liabilities was $848 Mil.
Long-Term Debt was $6,232 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)
=(2218.5 / 5118.1) / (2341.7 / 4898.9)
=0.43346164 / 0.47800527
=0.9068

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)
=(1785.9 / 4898.9) / (2073 / 5118.1)
=0.36455123 / 0.40503312
=0.9001

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 - (3375.1 + 661.7) / 36696.8) / (1 - (3731.7 + 664.7) / 35455.1)
=0.88999586 / 0.87600091
=1.016

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
=5118.1 / 4898.9
=1.0447

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))
=(156 / (156 + 664.7)) / (186.2 / (186.2 + 661.7))
=0.19008164 / 0.21960137
=0.8656

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)
=(1351.7 / 5118.1) / (1370.7 / 4898.9)
=0.26410191 / 0.27979751
=0.9439

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)
=((5623.9 + 849) / 36696.8) / ((6232 + 847.5) / 35455.1)
=0.17638868 / 0.19967508
=0.8834

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
=(-10.1 - -106.8 - 1039) / 36696.8
=-0.0257

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.

HRG Group Inc has a M-score of -2.66 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.

HRG Group Inc Annual Data

Dec07Dec08Dec09Dec10Sep11Sep12Sep13Sep14Sep15Sep16
DSRI 11110.17210.54911.20051.10481.06750.8778
GMI 11110.31430.81861.03411.33271.07840.8715
AQI 0.94590.94590.48386.74098.0810.96670.94960.94561.09741.0121
SGI 000096.42311.71241.23720.83611.01581.1022
DEPI -0.0011-0.0011-0.0145-0.0047-0.00360.57642.06421.78910.59010.9946
SGAI 1111-2.60891.02030.82640.85491.07920.9226
LVGI 0.04160.04160.08193.72680.60040.98011.82640.97140.9780.8918
TATA -0.0981-0.0981-0.078-0.0183-0.0104-0.0159-0.0165-0.0229-0.0263-0.0281
M-score -3.65-3.65-3.76-2.1584.96-2.49-2.28-2.36-2.50-2.65

HRG Group Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.39766.61877.5951.06753.11420.6330.5340.87780.86940.9068
GMI 1.54241.76542.73321.07840.92930.77210.48420.87150.86870.9001
AQI 1.00781.01440.93021.09740.99911.09521.09051.01211.02011.016
SGI 0.73170.70630.62121.01581.11931.20391.38461.10221.08251.0447
DEPI 2.15362.29922.1460.59010.58150.60130.54760.99460.81540.8656
SGAI 0.73270.64340.48331.07921.14451.29481.56530.92260.94050.9439
LVGI 0.9990.97381.13390.9780.96860.9670.81230.89180.8750.8834
TATA -0.0295-0.0315-0.0311-0.0263-0.0216-0.02-0.0284-0.0281-0.0261-0.0257
M-score -2.022.914.17-2.50-0.63-2.90-3.02-2.65-2.68-2.66
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