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GuruFocus has detected 7 Warning Signs with The Hershey Co $HSY.
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The Hershey Co (NYSE:HSY)
Beneish M-Score
-2.63 (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.

The Hershey Co has a M-score of -2.63 suggests that the company is not a manipulator.

HSY' s Beneish M-Score Range Over the Past 10 Years
Min: -3.35   Max: -2.03
Current: -2.63

-3.35
-2.03

During the past 13 years, the highest Beneish M-Score of The Hershey Co was -2.03. The lowest was -3.35. And the median was -2.71.


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 The Hershey Co 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 * 1.0639+0.528 * 1.0459+0.404 * 1.081+0.892 * 1.0293+0.115 * 0.7646
-0.172 * SGAI+4.679 * TATA-0.327 * LVGI
-0.172 * 0.9478+4.679 * -0.0554-0.327 * 1.0322
=-2.63

* 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 $596 Mil.
Revenue was 1879.678 + 1970.244 + 2003.454 + 1637.671 = $7,491 Mil.
Gross Profit was 906.56 + 742.269 + 850.848 + 747.398 = $3,247 Mil.
Total Current Assets was $1,874 Mil.
Total Assets was $5,342 Mil.
Property, Plant and Equipment(Net PPE) was $2,050 Mil.
Depreciation, Depletion and Amortization(DDA) was $307 Mil.
Selling, General & Admin. Expense(SGA) was $1,976 Mil.
Total Current Liabilities was $1,711 Mil.
Long-Term Debt was $2,351 Mil.
Net Income was 125.044 + 116.853 + 227.403 + 145.956 = $615 Mil.
Non Operating Income was 0.171 + -7.456 + -21.8 + -8.128 = $-37 Mil.
Cash Flow from Operations was 234.462 + 560.936 + 75.441 + 77.629 = $948 Mil.
Accounts Receivable was $544 Mil.
Revenue was 1828.812 + 1909.222 + 1960.779 + 1578.825 = $7,278 Mil.
Gross Profit was 817.376 + 854.36 + 892.064 + 735.408 = $3,299 Mil.
Total Current Assets was $1,773 Mil.
Total Assets was $5,306 Mil.
Property, Plant and Equipment(Net PPE) was $2,230 Mil.
Depreciation, Depletion and Amortization(DDA) was $247 Mil.
Selling, General & Admin. Expense(SGA) was $2,025 Mil.
Total Current Liabilities was $2,337 Mil.
Long-Term Debt was $1,571 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)
=(595.779 / 7491.047) / (544.027 / 7277.638)
=0.07953214 / 0.07475324
=1.0639

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)
=(3299.208 / 7277.638) / (3247.075 / 7491.047)
=0.453335 / 0.43346077
=1.0459

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 - (1873.861 + 2050.439) / 5342.385) / (1 - (1772.918 + 2230.071) / 5305.84)
=0.26544044 / 0.24555037
=1.081

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
=7491.047 / 7277.638
=1.0293

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))
=(246.503 / (246.503 + 2230.071)) / (306.876 / (306.876 + 2050.439))
=0.09953387 / 0.13018031
=0.7646

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)
=(1975.954 / 7491.047) / (2025.304 / 7277.638)
=0.26377541 / 0.27829139
=0.9478

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)
=((2350.941 + 1710.917) / 5342.385) / ((1571.388 + 2336.972) / 5305.84)
=0.76030799 / 0.73661475
=1.0322

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
=(615.256 - -37.213 - 948.468) / 5342.385
=-0.0554

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.

The Hershey Co has a M-score of -2.63 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.

The Hershey Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
DSRI 0.93190.90020.87340.88810.95521.0570.96311.20271.00830.9635
GMI 1.14520.96310.88380.90981.02280.96730.93751.02140.98161.0789
AQI 1.15190.7581.05330.80660.93561.11950.9771.09521.07911.1794
SGI 1.00051.03761.03231.07031.07231.09271.07551.03860.99531.0073
DEPI 0.64281.15051.27070.95320.99221.09011.11261.11950.90820.8094
SGAI 1.04081.15431.09121.10270.96611.05521.06020.96011.07060.9369
LVGI 1.05031.11910.85981.01240.99740.95220.9471.03451.1421.0909
TATA -0.133-0.0573-0.1714-0.08120.0093-0.0913-0.0607-0.0007-0.1256-0.0448
M-score -3.09-2.97-3.35-3.05-2.42-2.72-2.75-2.20-3.11-2.64

The Hershey Co Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
DSRI 1.20270.93891.01490.9521.00830.92261.1131.01310.96351.0639
GMI 1.02141.0221.00650.98380.98160.99151.00111.02941.07891.0459
AQI 1.09521.50041.22510.9931.07910.91171.21131.21451.17941.081
SGI 1.03861.04131.03141.01620.99530.97190.97970.98551.00731.0293
DEPI 1.11951.00420.98720.89730.90820.95550.83770.80530.80940.7646
SGAI 0.96010.9731.00421.03731.07061.04931.02470.95130.93690.9478
LVGI 1.03451.08781.111.13861.1421.13541.16461.03771.09091.0322
TATA -0.0007-0.0134-0.1099-0.0967-0.1256-0.1334-0.0555-0.0326-0.0448-0.0554
M-score -2.20-2.37-2.90-3.04-3.11-3.30-2.64-2.56-2.64-2.63
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